SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the registrant |_|
Filed by a party other than the registrant |X|
Check the appropriate box:
|_| Preliminary proxy statement |_| Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
First Union Real Estate Equity and Mortgage Investments
-------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Gotham Partners, L.P.
-------------------------------------------------------
(Name of Person Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
1998 ANNUAL MEETING OF THE BENEFICIARIES
OF
FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS
---------------------------------
PROXY STATEMENT
OF
GOTHAM PARTNERS, L.P.
---------------------------------
This Proxy Statement and the accompanying WHITE proxy card are furnished by
Gotham Partners, L.P., a New York limited partnership ("Gotham"), in
connection with the solicitation by Gotham of proxies from the holders of
shares of Beneficial Interest, par value $1.00 per share (the "Shares"), of
First Union Real Estate Equity and Mortgage Investments, an Ohio business
trust (the "Company"), to vote at the 1998 Annual Meeting of Beneficiaries
of the Company, including any adjournments or postponements thereof and any
special meeting of Beneficiaries called in lieu thereof (the "Annual
Meeting"), to take the following actions: (i) to elect William A. Ackman,
David P. Berkowitz and James A. Williams to the three existing seats on
Class II of the Board of Trustees of the Company (the "Board") which will
be open for election at the Annual Meeting; (ii) to approve a Beneficiary
proposal to increase the size of the Board from nine members to fifteen
members, with two new seats in each of the three classes on the Board, and
to hold an election for the six newly created seats (the "Gotham
Proposal"); (iii) in the event that the Beneficiaries of the Company adopt
the Gotham Proposal, to elect Daniel Shuchman and Steven S. Snider to the
new Class I seats on the Board, Mary Ann Tighe and Stephen J. Garchik to
the new Class II seats on the Board, and David S. Klafter and Daniel J.
Altobello to the new Class III seats on the Board (each of such nominees
together with the nominees referred to in clause (i) above and Gotham's
alternate nominee being hereinafter referred to as a "Gotham Nominee" and
collectively as the "Gotham Nominees"); and (iv) to vote against the
Company's proposal to fix the number of Trustees at twelve with one
additional vacancy to be added to each existing class of Trustees (the
"Current Board's Proposal"). The principal executive offices of the Company
are located at 55 Public Square, Suite 1900, Cleveland, Ohio 44113-1937.
This Proxy Statement and the WHITE proxy card are first being furnished to
the Company's Beneficiaries on or about March 16, 1998.
GOTHAM RECOMMENDS THAT YOU VOTE IN FAVOR OF THE GOTHAM NOMINEES AND
THE GOTHAM PROPOSAL AND AGAINST THE CURRENT BOARD'S PROPOSAL.
The adoption of the Gotham Proposal and the election of the Gotham
Nominees will result in Gotham obtaining control of the Company's Board of
Trustees. Gotham is seeking control because of its disappointment with the
Company's fundamental business performance as measured on a per-share basis
and Gotham's belief that the Company has not successfully pursued certain
alternatives to maximize the value inherent in its stapled-stock structure.
These alternatives include (i) the sale of the Company, (ii) a partnership
with a strategic investor, (iii) the acquisition of appropriate operating
businesses at economically attractive prices which will take advantage of
the Company's stapled-stock structure, and (iv) a change in management. If
elected, the Gotham Nominees, subject to their fiduciary duties, will
propose changes in the senior management of the Company, although Gotham
has not yet identified the members of the new management team, and will
explore other alternatives to maximize shareholder value, including an
outright sale of the Company, a partnership with a strategic investor
and/or the acquisition of real estate-intensive operating businesses, in a
manner that would preserve and maximize the value of the Company's
stapled-stock structure.
The Annual Meeting is scheduled to be held in the Forum Conference
Center, located at One Cleveland Center, Cleveland, Ohio, on Tuesday, April
14, 1998, at 10:00 A.M., Eastern Daylight Time. The Company has set
February 13, 1998 as the record date for determining the Beneficiaries
entitled to notice of and to vote at the Annual Meeting (the "Record
Date"). Only Beneficiaries of record of Shares on the Record Date will be
entitled to one vote at the Annual Meeting for each Share held on the
Record Date. Gotham and Gotham Partners II, L.P. ("Gotham II"), an
affiliate of Gotham, beneficially own an aggregate of 2,632,400 Shares
(including 100 Shares held of record by Gotham and the remainder held in
"street name"), which collectively represent approximately 8.34% of the
Shares outstanding (based on information publicly disclosed by the
Company). Gotham and Gotham II intend to cause all of such Shares to be
voted FOR the adoption of the Gotham Proposal and the election of the
Gotham Nominees and AGAINST the adoption of the Current Board's Proposal.
BY SIGNING, DATING AND MAILING THE ENCLOSED WHITE PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED YOU WILL REVOKE ANY PREVIOUSLY DATED PROXY.
ONLY YOUR LATEST-DATED PROXY WILL COUNT AT THE ANNUAL MEETING.
THIS SOLICITATION IS BEING MADE BY GOTHAM AND NOT ON BEHALF OF THE
BOARD OF TRUSTEES OF THE COMPANY.
YOUR VOTE IS EXTREMELY IMPORTANT. If you do not submit a proxy card or
vote in person at the Annual Meeting, your Shares will not be voted on the
Gotham Proposal, the Gotham Nominees or the Current Board's Proposal. If
you agree with Gotham's efforts, we ask for your support by immediately
signing, dating and mailing the enclosed WHITE proxy card in the
postage-paid envelope provided.
SHARES IN YOUR NAME. No matter how many Shares you own, vote "FOR" the
Gotham Proposal and the Gotham Nominees and "AGAINST" the Current Board's
Proposal by signing, dating and mailing the enclosed WHITE proxy card in
the postage-paid envelope provided. Sign the WHITE proxy card exactly as
your name appears on the share certificate regarding your Shares.
SHARES IN YOUR BROKER'S OR BANK'S NAME. If you own Shares in the name
of a brokerage firm, bank or other nominee, your broker, bank or other
nominee cannot vote your Shares for the Gotham Proposal and the Gotham
Nominees and against the Current Board's Proposal unless it receives your
specific instructions. Please sign, date and mail as soon as possible the
enclosed WHITE proxy card in the postage-paid envelope that has been
provided by your broker, bank or other nominee to be sure that your Shares
are voted, or contact the person responsible for your account and instruct
that person to execute a WHITE proxy card on your behalf.
QUESTIONS AND ASSISTANCE. If you have not received a WHITE proxy
card or have any questions or need assistance in voting, please call:
Beacon Hill Partners, Inc.
90 Broad Street
New York, New York 10004
(212) 843-8500 (CALL COLLECT)
or
CALL TOLL-FREE (800) 253-3814
PLEASE REMEMBER TO DATE YOUR PROXY CARD, AS ONLY YOUR LATEST DATED
PROXY WILL COUNT AT THE ANNUAL MEETING. IF YOU HAVE ANY DOUBTS AS TO
WHETHER YOUR PROXY WILL BE RECEIVED IN TIME TO BE CAST AT THE ANNUAL
MEETING, PLEASE CALL BEACON HILL PARTNERS, INC. PROMPTLY.
THE GOTHAM PROPOSAL
Gotham sets forth the following proposal to be considered by the
Beneficiaries of the Company at the Annual Meeting:
Resolved, in accordance with Article VIII, Section 8.1 of the
Company's Declaration of Trust, as amended (the "Declaration of
Trust"),
(i) that the number of Trustees constituting the full Board
of Trustees of the Company shall be determined at the Annual
Meeting to be fixed at fifteen (an increase of six members); and
(ii) that two of the newly-created seats of the Board of
Trustees of the Company be assigned to each of Class I, Class II
and Class III; and
(iii) that, at the Annual Meeting, in addition to electing
the three Trustees to fill the seats of the three Trustees in
Class II whose terms are expiring, the Beneficiaries of the
Company shall also elect six Trustees (two Trustees to each of
Class I, Class II and Class III) to serve in the newly-created
seats established in paragraph (ii) above.
YOU ARE URGED TO VOTE FOR THE GOTHAM PROPOSAL ON THE ENCLOSED WHITE
PROXY CARD.
ELECTION OF GOTHAM NOMINEES AS TRUSTEES
Gotham is proposing that the Beneficiaries of the Company elect the
Gotham Nominees to the Board at the Annual Meeting. Currently, the Board of
Trustees is composed of nine Trustees and is divided into equal classes
known as Class I, Class II and Class III whose terms expire in 2000, 1998
and 1999, respectively. It is proposed that William A. Ackman, David P.
Berkowitz and James A. Williams be elected to succeed the current Class II
Trustees on the Board (or any Trustee named to fill any vacancy created by
the death, retirement, resignation or removal of any of such Class II
Trustees) at the Annual Meeting. In the event that the Beneficiaries of the
Company adopt the Gotham Proposal, it is proposed that Daniel Shuchman and
Steven S. Snider be elected to the two Class I seats on the Board created
as a result of the adoption of the Gotham Proposal, Mary Ann Tighe and
Stephen J. Garchik be elected to the two Class II seats on the Board
created as a result of the adoption of the Gotham Proposal, and David S.
Klafter and Daniel J. Altobello be elected to the two Class III seats on
the Board created as a result of the adoption of the Gotham Proposal.
Richard A. Mandel will be nominated for election to the Board in the event
that any one of the aforementioned candidates is unable for any reason to
be elected and to serve as a Trustee.
The following table sets forth the name, age and present principal
occupation, business address and business experience for the past five
years, and certain other information, with respect to each of the Gotham
Nominees. This information has been furnished to Gotham by the respective
Gotham Nominees. Each of the Gotham Nominees has consented to serve as a
Trustee and, if elected, would hold office until the expiration of the term
of the Class of Trustees to which such nominee is elected and until his or
her successor has been elected and qualified or until earlier death,
retirement, resignation or removal.
PRINCIPAL OCCUPATION OR
NAME, AGE AND EMPLOYMENT DURING
BUSINESS ADDRESS THE LAST FIVE YEARS
---------------- -------------------
William A. Ackman (31)............... Through a company he owns, Mr.
Gotham Partners Management Co. LLC Ackman is a co-investment manager
110 East 42nd Street, 18th Floor of Gotham and Gotham II. Since
New York, New York 10017 January 1, 1993, Mr. Ackman has
been the Vice President, Secretary
and Treasurer of GPLP Management
Corp., the Managing Member of
Gotham Partners Management Co. LLC,
an investment management firm (and
the General Partner of its
predecessor entity). Mr. Ackman has
been employed by Gotham Partners
Management Co. LLC and its
predecessor entity since January 1,
1993. Mr. Ackman was a general
partner of Section H Partners,
L.P., the General Partner of the
Gotham Partners, L.P. and Gotham
Partners II, L.P. investment funds,
from January 1, 1993 through
September 1993. Mr. Ackman has been
the President, Secretary and
Treasurer of Karenina Corporation,
a general partner of Section H
Partners, L.P. since October 1993.
Mr. Ackman is also a member of the
Executive Committee of Gotham Golf
Partners, L.P. (described below).
Mr. Ackman holds an A.B. from
Harvard College and an M.B.A. from
Harvard Business School. Mr. Ackman
is a member of the Board of
Directors of the Jerusalem
Foundation and Chairman of its
Investment Committee. He is also
the Chairman of Crimson Impact, a
community service organization.
Daniel J. Altobello (57)............. Mr. Altobello has been the Chairman
ONEX Food Services, Inc. of the Board of ONEX Food Services,
6550 Rock Spring Drive Inc., an airline catering company,
Bethesda, Maryland 20817 since September 1995. Mr. Altobello
has been a partner in Ariston
Investment Partners, a consulting
firm, since September 1995. Mr.
Altobello was the Chairman,
President and Chief Executive
Officer of Caterair International
Corporation, an airline catering
company, from January 1, 1993 until
September 1995. Mr. Altobello is a
member of the Boards of Directors
of American Management Systems,
Inc., Colorado Prime Corporation
and Blue Cross Blue Shield of
Maryland. Mr. Altobello holds a
B.A. from Georgetown University and
an M.B.A. from Loyola College in
Maryland.
David P. Berkowitz (36).............. Through a company he owns, Mr.
Gotham Partners Management Co. LLC Berkowitz is a co-investment
110 East 42nd Street, 18th Floor manager of Gotham and Gotham II.
New York, New York 10017 Since January 1, 1993, Mr.
Berkowitz has been the President of
GPLP Management Corp., the Managing
Member of Gotham Partners
Management Co. LLC, an investment
management firm (and the General
Partner of its predecessor entity).
Mr. Berkowitz has been employed by
Gotham Partners Management Co. LLC
and its predecessor entity since
January 1, 1993. Mr. Berkowitz was
a general partner of Section H
Partners, L.P., the General Partner
of Gotham Partners, L.P. and Gotham
Partners II, L.P. investment funds,
from January 1993 through September
1993. Mr. Berkowitz has been the
President, Secretary and Treasurer
of DPB Corporation, a general
partner of Section H Partners, L.P.
since October 1993. Mr. Berkowitz
is also a member of the Executive
Committee of Gotham Golf Partners,
L.P. (described below). Mr.
Berkowitz holds a B.S. and an M.S.
from the Massachusetts Institute of
Technology and an M.B.A. from
Harvard Business School. Mr.
Berkowitz is a member of the Board
of Directors and serves on the
Executive Committee of the Jewish
Community House of Bensonhurst.
Stephen J. Garchik (44).............. Since January 1, 1993, Mr. Garchik
The Evans Company has been the President of The Evans
8251 Greensboro Drive, Suite 850 Company, a commercial real estate
McLean, Virginia 22102 development and management firm.
Since July 1996, Mr. Garchik has
been the Chairman of Gotham Golf
Partners, L.P., a community golf
course ownership, operation and
development enterprise in which
Gotham has a substantial
investment. Mr. Garchik holds a
B.S. and an M.B.A. from the
University of Pennsylvania.
David S. Klafter (43)................ Mr. Klafter has been an in-
Gotham Partners Management Co. LLC house counsel and a member of the
110 East 42nd Street, 18th Floor investment team of Gotham Partners
New York, New York 10017 Management Co. LLC, an investment
management firm, since April 1996.
Mr. Klafter was counsel at White &
Case, a law firm, from January 1,
1993 until December 1993, and a
partner at White & Case from
January 1994 until April 1996. Mr.
Klafter's law practice was in
general commercial litigation, with
an emphasis on real-estate related
matters, including leases,
mortgages and loan work-outs. Mr.
Klafter holds a B.A. from
Northwestern University and a J.D.
from New York University School of
Law. He serves on the Visiting
Committee of the College of Arts
and Sciences of Northwestern
University.
Richard A. Mandel (35)............... Mr. Mandel has been the President
Alternate Nominee of the Brokerage Division of
Kennedy-Wilson International Kennedy-Wilson International, a
1270 Avenue of the Americas real estate brokerage and
Suite 1818 investment firm, since December
New York, New York 10020 1996. From October 1993 until
December 1996, Mr. Mandel was a
Managing Director in charge of the
Asian Operations of Kennedy-Wilson
International. From January 1, 1993
until October 1993, he was a
Director of Jones Lang Wootton, a
real estate brokerage firm. Mr.
Mandel is a member of the Board of
Directors of Kennedy-Wilson
International. Mr. Mandel holds a
B.A. from Washington University in
St. Louis and an M.B.A. from
Northwestern University's Kellogg
Graduate School of Management.
Daniel Shuchman (32)................. Mr. Shuchman has been a member of
Gotham Partners Management Co. LLC the investment team at Gotham
110 East 42nd Street, 18th Floor Partners Management Co. LLC, an
New York, New York 10017 investment management firm, since
October 1994. Mr. Shuchman was an
investment banker at Goldman, Sachs
& Co., an investment banking firm,
from January 1, 1993 until August
1994. Mr. Shuchman holds a B.A.
from the University of
Pennsylvania.
Steven S. Snider (41)................ Since January 1, 1993, Mr. Snider
Hale and Dorr LLP has been a senior partner at Hale
1455 Pennsylvania Avenue, N.W. and Dorr LLP, a law firm. Mr.
Washington, D.C. 20004 Snider holds an A.B. from Cornell
University and a J.D. from the
University of Chicago Law School.
Mary Ann Tighe (49).................. Since January 1, 1993, Ms. Tighe
Insignia/ESG has been an Executive Managing
200 Park Avenue Director and a member of the
New York, New York 10166 Executive and Strategic Planning
Committees of Insignia/ESG, a
commercial real estate firm. Ms.
Tighe holds a B.A. from Georgetown
University and a master's degree
from the University of Maryland.
She is on the Board of Directors of
the New 42nd Street, a New York
City-based community revitalization
organization.
James A. Williams (55)............... Since January 1, 1993, Mr. Williams
Williams, Williams, Ruby & Plunkett PC has been the President of Williams,
380 N. Woodward Avenue, Suite 380 Williams, Ruby & Plunkett PC, a law
Birmingham, Michigan 48009 firm. Mr. Williams has also been
the Chairman of Michigan National
Bank and Michigan National
Corporation since November 1995.
Mr. Williams holds a B.A. from the
University of Michigan and a J.D.
from Wayne State University Law
School. Mr. Williams is Chairman of
the Henry Ford Hospital in West
Bloomfield, Michigan. He is a
Trustee of Henry Ford Health System
and the Oakland University
(Michigan) Foundation and a member
of the Board of Governors of the
Cranbrook School.
If the Gotham Proposal is adopted and all of the Gotham Nominees are
elected to the Board, the Gotham Nominees will constitute a majority of the
Board. If the Gotham Nominees are elected to the existing Class II seats on
the Board that will be open at the Annual Meeting, but the Gotham Proposal
is not adopted by the Beneficiaries of the Company, the Gotham Nominees
will not constitute a majority of the Board, but the three Gotham Nominees
elected in such case will, in accordance with their fiduciary duties, use
their positions on the Board to urge the Board to make certain changes to
senior management and to explore other alternatives to maximize shareholder
value in a manner that would preserve and maximize the value of the
Company's stapled-stock structure.
The Gotham Nominees will not receive any compensation from Gotham for
their services as Trustees of the Company. Gotham has agreed to indemnify
all of the Gotham Nominees against any costs, expenses and other
liabilities associated with their nomination and the election contest. Each
of the Gotham Nominees has consented to being a nominee of Gotham for
election as a Trustee of the Company and to serve as a Trustee if so
elected.
According to the Company's public filings, if elected as Trustees of
the Company, the Gotham Nominees who are not employees of the Company would
receive under the Company's current policies an annual retainer fee of
$12,000 and an attendance fee of $1,000 for each meeting of the Board and
each committee meeting attended. The Gotham Nominees, if elected, may
consider modifying this fee-based compensation structure to an equity-based
incentive program.
In order to further align their interests with those of the Company's
Beneficiaries, the Gotham Nominees who are affiliated with Gotham, namely
William A. Ackman, David P. Berkowitz, David S. Klafter and Daniel
Shuchman, have agreed to waive all fees and any other compensation payable
to them by the Company in the course of their service as Trustees.
All Trustees of the Company would be reimbursed by the Company for
expenses incurred in connection with their services as Trustees of the
Company. The Gotham Nominees, if elected, will be indemnified by the
Company for service as a Trustee of the Company to the extent
indemnification is provided to Trustees of the Company under the
Declaration of Trust of the Company and the By-Laws of the Company, as
amended (the "By-Laws").
The beneficial ownership of Shares by the Gotham Nominees and certain
additional information concerning the Gotham Nominees and other
participants in this solicitation is set forth on Schedule I of this Proxy
Statement.
Gotham does not expect that any of the Gotham Nominees will be unable
to stand for election, but, in the event that any one of the Gotham
Nominees is unable to stand for election, the Shares represented by the
enclosed WHITE proxy card will be voted for Richard A. Mandel instead of
such Gotham Nominee. In addition, Gotham reserves the right to nominate
substitute or additional persons if the Company makes or announces any
changes to its By-Laws or takes or announces any other action that has, or
if consummated would have, the effect of disqualifying any or all of the
Gotham Nominees. The Company has contested Gotham's nomination of the
Gotham Nominees and its making of the Gotham Proposal and is seeking to
prevent and nullify such nominations and proposal. See "Certain
Litigation." In any such case, Shares represented by the enclosed WHITE
proxy card will be voted for all such substitute or additional nominees
selected by Gotham.
In accordance with applicable regulations of the Securities and
Exchange Commission (the "Commission" or "SEC"), the WHITE proxy card
affords each Beneficiary the opportunity to designate the names of any of
the Gotham Nominees whom he or she does not desire to elect to the Board.
Notwithstanding the foregoing, Gotham urges Beneficiaries to vote for all
of the Gotham Nominees on the enclosed WHITE proxy card. The persons named
as proxies on the enclosed WHITE proxy card will vote, in their discretion,
for each of the Gotham Nominees who is nominated for election and for whom
authority has not been withheld.
YOU ARE URGED TO VOTE FOR THE ELECTION OF THE GOTHAM NOMINEES ON THE
ENCLOSED WHITE PROXY CARD.
THE CURRENT BOARD'S PROPOSAL
The Company's amended preliminary proxy statement in connection with
the Annual Meeting, filed with the Commission on February 20, 1998 (the
"Company's Preliminary Proxy Statement"), proposes that the Beneficiaries
of the Company vote in favor of fixing the number of Trustees at twelve, an
increase of three seats, with one vacancy added to each of the three
existing classes of Trustees. Under the Current Board's Proposal, the
Beneficiaries would be denied the right to fill these seats. Instead, the
incumbent Trustees would be able to pick whomever they wish to fill the new
seats whenever they wish to do so, subject only to the nominees being
"qualified" (a term left undefined in the Company's Preliminary Proxy
Statement) and, presumably, to the incumbent Trustees' fiduciary duties.
Gotham is against the Current Board's Proposal because it denies the
Beneficiaries the right to choose their Trustees. Gotham believes that the
Current Board's Proposal is in contravention of the Declaration of Trust,
which provides that the right of Trustees to fill vacancies on the Board of
Trustees arises only when a Trustee resigns or is removed or when it is
determined subsequent to an election that a newly-elected Trustee is not
qualified to serve as a Trustee under the Declaration of Trust, and not in
connection with an increase in the size of the Board of Trustees. Gotham
believes that the Current Board's Proposal is inconsistent with
well-established law which provides that absent an explicit provision in
the governing documents to the contrary, shareholders have the right to
vote for newly-created seats on a board and these seats are not deemed
vacancies. Gotham is currently defending the Beneficiaries' right to choose
their Trustees in its litigation with the Company. See "Possible Effects of
the Adoption of the Gotham Proposal and the Election of the Gotham
Nominees--Certain Provisions of the Declaration of Trust" and "Certain
Litigation."
YOU ARE URGED TO VOTE AGAINST THE CURRENT BOARD'S PROPOSAL ON THE
ENCLOSED WHITE PROXY CARD.
BACKGROUND OF THE SOLICITATION
On June 4, 1997, Gotham and Gotham II filed a Schedule 13D with the
Commission which reported that it had acquired Shares and options to
acquire Shares for investment purposes. The Schedule 13D stated that Gotham
and Gotham II generally pursue an investment objective that seeks capital
appreciation, and that in pursuing this investment objective, Gotham and
Gotham II analyze and evaluate the performance of securities owned by them
and the operations, capital structure and markets of companies in which
they invest on a continuous basis through analysis of documentation on and
discussions with knowledgeable industry and market observers and with
representatives of such companies (often at the invitation of management).
Gotham and Gotham II further reported their belief that in order for
the Company to maximize shareholder value by taking advantage of its
stapled-stock structure, the Company should execute sizable acquisitions of
real estate-intensive operating businesses at attractive prices. In
addition, Gotham and Gotham II described their concern that (i) in their
opinion, existing management does not have the requisite background and
experience to implement such a value-maximizing strategy, and (ii) the
Company had raised capital in equity offerings that had diluted the
holdings of existing stockholders.
On July 14, 1997, Gotham and Gotham II sent a letter to the Board of
Trustees of the Company and the Board of Directors of First Union
Management, Inc., the Company's affiliated management company. In summary,
the letter raises questions about the Company's strategic plan and states
that Gotham and Gotham II have four primary concerns with the Company's
management, as follows:
first, Gotham and Gotham II's belief that management was unaware of
the Company's stapled-stock structure until late 1996, as indicated (i) by
the Company's description of its strategic plan on October 23, 1996, on
which date the Company stated on page S-3 of its convertible preferred
stock prospectus that the Company's "five-year strategic plan" consisted of
"renovating the properties, repositioning the asset portfolios through
targeted acquisitions and dispositions, and improving the operations of the
Company," and made no reference to the use of the Company's stapled-stock
structure and (ii) by a review of the Company's standard tag line for its
press releases, which began mentioning the Company's stapled-stock
structure on or about December 4, 1996;
second, Gotham and Gotham II's belief that the Company overpaid for
its Imperial Parking unit, which belief is based on (i) a comparison of the
multiple of approximately 17 times 1996 fiscal year EBITDA paid by the
Company for Imperial Parking Ltd. to the multiple paid by Apollo Real
Estate and AEW Realty Advisors for Allright Parking in October 1996 of less
than 10 times 1996 fiscal year EBITDA and (ii) the fact that a significant
portion of Imperial Parking's assets are not REIT-eligible because it owns
or leases few of its assets and because it is not based in the United
States, which limits the Company's ability to take advantage of its
stapled-stock structure;
third, Gotham and Gotham II's belief that the Company's series of
equity offerings beginning in October 1996 diluted existing shareholders
through the issuance of additional common stock and preferred stock. This
belief arises from the decline in the Company's per share funds from
operation of 13% for the third quarter of 1997, and 27% for the fourth
quarter of 1997, as compared to the corresponding periods in 1996; and
fourth, Gotham and Gotham II's belief that management lacks the
background and experience to manage an acquisition-intensive operating
business because Mr. Mastandrea's background and experience appear to be
chiefly in the area of real estate asset management, and because the
Company had not made an acquisition of an operating company during the term
in office of its current senior management until the Imperial Parking
acquisition.
The letter also described value-maximizing techniques employed by
three other stapled-stock REITs (Starwood Lodging Trust, California Jockey
Club and Santa Anita Realty), indicated that Gotham and Gotham II would not
accept greenmail, and requested a meeting of Gotham representatives with
the Trustees and Directors to discuss the matters raised in the letter.
On July 21, 1997, Mary Ann Jorgenson of Squire, Sanders & Dempsey,
L.L.P., outside counsel to the Company, sent a letter to Stephen Fraidin of
Fried, Frank, Harris, Shriver & Jacobson, special counsel to Gotham and
Gotham II, stating her belief that a reference in the letter sent by Gotham
and Gotham II on July 14, 1997 to the effect that Gotham and Gotham II have
learned from the example of Warren Buffett to seek investments in great
businesses managed by people who they like, trust and admire was
inappropriate because of her belief that the use of the word "trust"
suggested, by innuendo, that the management of First Union, and
specifically Mr. Mastandrea, lacked integrity and honesty.
---------
On July 23, 1997, Gotham and Gotham II sent the following letter to
James C. Mastandrea, the Chairman, President and CEO of the Company:
Mr. James C. Mastandrea
Chairman/President/CEO
First Union Real Estate
55 Public Square, Suite 1900
Cleveland, OH 44113
Dear Mr. Mastandrea:
On July 14, we sent a letter to the Trustees of First Union Real
Estate and Mortgage Investments and the Directors of First Union
Management, Inc. In that letter we asked the Trustees and
Directors, as fiduciaries for the company's shareholders, to
consider two questions. First, is the company's new strategic
plan the most appropriate plan to ensure long-term maximization
of shareholder value? Second, is the current management team
capable of identifying, executing, and integrating the
acquisitions necessary to maximize the value of the company's
unusual corporate structure?
We offered what we believe to be reasoned arguments for questioning
the logic of the company's recently revised strategic plan and current
management's ability to implement it. In the subsequent week, we have
received no substantive response to our letter.
We are truly interested in being long-term shareholders of First
Union and enjoying the benefit of the company's unusual corporate
structure over a multi-year period. We have absolutely no
interest in any arrangement through which we receive short-term
benefit at the expense of other shareholders. Further, we have
several specific proposals which we believe will manifest our
long-term commitment to First Union.
We would appreciate the opportunity to meet with the Trustees of
First Union Real Estate and Mortgage Investments and the
Directors of First Union Management, Inc. to discuss our original
concerns and our proposals for the future. We will make ourselves
available at your convenience in Cleveland, New York, or any
other mutually agreeable location. We look forward to your
response.
Very truly yours,
Gotham Partners, L.P.
Gotham Partners II, L.P.
/s/ William A. Ackman
---------------------
William A. Ackman
/s/ David P. Berkowitz
----------------------
David P. Berkowitz
---------
On August 20, 1997, James C. Mastandrea sent the following letter
to David P. Berkowitz of Gotham:
Mr. David P. Berkowitz
Gotham Partners Management Co. LLC
110 East 42nd Street, 18th Floor
New York, NY 10017
Dear Mr. Berkowitz:
First Union's Board of Trustees has asked me to respond to your
most recent correspondence.
Your comments about the Trust's strategy and your stated
intentions concerning control of the Trust cause the Board to be
concerned about the impact your actions could have on First
Union's REIT status. Accordingly, in fulfilling its obligations
as fiduciaries to all of our shareholders, the Board formally
requests certain information about your holdings pursuant to
Section 11.7 of the Declaration of Trust of First Union and
Article VI, Section 6(c) of the By-Laws. Specifically, kindly
describe in writing the nature of all such actual, "constructive"
(as defined under the Internal Revenue Code) and "beneficial" (as
defined under Section 13(d) of the Securities Act [sic] of 1934)
ownership of First Union securities by you, your partner, Mr.
Ackman, and by any and all Gotham entities, affiliates and group
members. In addition, we are requesting that you provide detailed
information about the legal status, structure and ownership of
each such entity, affiliate and group member.
Once we have received and reviewed this written information, we
will be in a position to consider the proposals you mention. If
you will send your suggestions in writing to my attention, the
Board will give them the same consideration it gives all
shareholder proposals.
I look forward to hearing from you.
Sincerely,
/s/ James C. Mastandrea
-----------------------
James C. Mastandrea
---------
On September 8, 1997, William A. Ackman of Gotham sent the
following letter to James C. Mastandrea:
Mr. James C. Mastandrea
First Union Real Estate Investments
55 Public Square Suite 1900
Cleveland, OH 44113
Dear Jim:
We are disappointed that the only substantive response to our
letters to you is your request of August 20, 1997 for certain
information from us. We assume that your questions about our
ownership in First Union relate to the Board's concern about the
Trust maintaining its special tax status. We assume that you are
acting in good faith by addressing these questions to us, rather
than attempting to make it cumbersome for us to work with the
Trust in our attempt to increase shareholder value.
Please be assured that we are well aware of the risks to First
Union of a loss of the Company's REIT status or its favorable
paired-share structure. In an effort to be responsive, we have
addressed your questions below.
As of the date hereof, Gotham Partners, L.P., a limited
partnership, is the actual owner of 877,825 common shares of
First Union and constructively owns, within the meaning of
Treasury Regulation 1.857-8(c) and Section 544 of the Internal
Revenue Code (through ownership of an option), an additional
1,183,150 common shares. In addition, as of the date hereof
Gotham Partners II, L.P., a limited partnership, is the actual
owner of 9,075 common shares of First Union and constructively
owns (as defined above) an additional 16,850 common shares.
Neither I nor David Berkowitz, nor any entity under our control,
actually, constructively (as defined above) or beneficially owns
any other equity interests in First Union.
We sincerely hope that now that you have received this
information you will turn to more fundamental issues, in
particular, those raised in our July 14, 1997 letter. As we
stated in that letter, we would welcome the opportunity to meet
with the Board so that we can discuss our concerns and any
proposals we may have in more detail.
Sincerely,
/s/ William A. Ackman
---------------------
William A. Ackman
---------
On October 7, 1997, Mr. Mastandrea sent the following letter to
Mr. Berkowitz:
Mr. David P. Berkowitz
Gotham Partners Management Co. LLC
110 East 42nd Street, 18th Floor
New York, NY 10017
Dear David:
We received your letter of September 8, 1997. It is simply not
responsive to the Board's demand for information about the
structure of your entities and your group. In particular, you are
obligated to provide the names of each and every member of Gotham
I and II, as well as each and every member of other entities who
own First Union stock. Undoubtedly you are aware that you are
obligated under the Declaration of Trust to divulge such
ownership information.
Your partial response and your use of 13D amendments as a media
campaign look more like market games than real shareholder
interest. If you have serious proposals for First Union's future,
provide the ownership information we need, and put your proposals
in writing.
Sincerely,
/s/ James C. Mastandrea
-----------------------
James C. Mastandrea
---------
On January 8, 1998, Gotham sent the following letter to Paul F.
Levin, Secretary of the Company. The full text of the letter and its
exhibits and accompanying documents appear below except for Exhibit C
(the "Description of the Proposal" and the "Reasons for the
Proposal"), which is summarized.
Paul F. Levin, Esq.
Secretary
First Union Real Estate Equity
and Mortgage Investments
55 Public Square, Suite 1900
Cleveland, Ohio 44113-1937
Dear Mr. Levin:
Gotham Partners, L.P. ("Gotham"), a Beneficiary of First
Union Real Estate Equity and Mortgage Investments (the
"Company"), hereby gives notice of the following to the Secretary
of the Company pursuant to Article I, Section 7 of the By-Laws of
the Company:
1. Gotham hereby nominates William A. Ackman, David P.
Berkowitz and James A. Williams for election as Class
II Trustees to the Board of Trustees of the Company at
the 1998 Annual Meeting of Beneficiaries of the Company
(or any Special Meeting of Beneficiaries held in lieu
thereof).
2. Gotham hereby makes the proposal attached as Exhibit A
hereto for consideration by the Beneficiaries at the
1998 Annual Meeting of Beneficiaries of the Company (or
any Special Meeting of Beneficiaries held in lieu
thereof) (the "Proposal").
3. Gotham hereby nominates Daniel Shuchman and Steven S.
Snider for election to the two Class I seats on the
Board of Trustees of the Company created as a result of
the adoption of the Proposal; Mary Ann Tighe and
Stephen J. Garchik for election to the two Class II seats
on the Board of Trustees of the Company created as a
result of the adoption of the Proposal; and David S.
Klafter and Daniel J. Altobello for election to the two
Class III seats on the Board of Trustees of the Company
created as a result of the adoption of the Proposal;
such elections to be held immediately following the
approval of the Proposal by the Beneficiaries at the
1998 Annual Meeting of Beneficiaries of the Company (or
any Special Meeting held in lieu thereof).
4. Gotham hereby nominates Richard A. Mandel for election
to the Board of Trustees of the Company, provided that
Mr. Mandel shall stand for election only in the event
that any of Gotham's nominees named in paragraphs 1 or
3 above is unable for any reason to serve as a Trustee
of the Company.
Pursuant to Article I, Section 7 of the By-Laws of the
Company, the following documentation is included herewith: (i)
the information specified in Article I, Section 7(c)(i) of the
By-Laws of the Company with respect to each of Gotham's nominees
for election to the Board of Trustees, which is attached as
Exhibit B hereto; (ii) a brief description of the Proposal and a
statement of Gotham's reasons for making the Proposal, which is
attached as Exhibit C hereto; (iii) the information required to
be provided pursuant to Article I, Sections 7(c)(iii), (iv) and
(v) of the By-Laws of the Company, which is attached as Exhibit D
hereto; (iv) a certification by Gotham that each of Gotham's
nominees meets all of the qualifications for Trustees set forth
in the Amended Declaration of Trust of the Company; and (v) a
certification by Gotham that the Proposal does not conflict with
or violate any provision of the Declaration of Trust of the
Company.
If you have any questions concerning this notice or any
related legal matters, please contact our counsel, Alexander R.
Sussman of Fried, Frank, Harris, Shriver & Jacobson, at (212)
859-8551.
Very truly yours,
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P., its general partner
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
----------------------------
David P. Berkowitz
President
By: Karenina Corporation,
a general partner of Section H Partners, L.P.
By: /s/ William A. Ackman
---------------------------
William A. Ackman
President
Exhibit A
---------
Proposal
--------
Gotham Partners, L.P. ("Gotham Partners"), a Beneficiary of
First Union Real Estate Equity and Mortgage Investments ("the
Company"), meeting the qualifications set forth in Article I,
Section 7 of the By-Laws of the Company, sets forth the following
proposal to be considered by the Beneficiaries of the Company at
the Company's 1998 Annual Meeting of Beneficiaries (or any
Special Meeting of Beneficiaries held in lieu thereof):
Proposed, in accordance with Article VIII, Section 8.1 of
the Company's Amended Declaration of Trust, dated July 25, 1986,
(i) that the number of Trustees constituting the full Board
of Trustees of the Company shall be determined at the 1998 Annual
Meeting of Beneficiaries of the Company (or any Special Meeting
of Beneficiaries held in lieu thereof) to be fixed at fifteen (an
increase of six members); and
(ii) that two of the newly-created seats of the Board of
Trustees of the Company be assigned to each of Class I, Class II
and Class III; and
(iii) that, at the 1998 Annual Meeting of Beneficiaries of
the Company (or any Special Meeting of Beneficiaries held in lieu
thereof), in addition to electing the three Trustees to fill the
seats of the three Trustees in Class II whose terms are expiring,
the Beneficiaries of the Company shall also elect six Trustees
(two Trustees to each of Class I, Class II and Class III) to
serve in the newly-created seats established in paragraph (ii)
above.
Exhibit B
---------
Trustee Nominee Information
---------------------------
The following is the information required to be given by
Gotham Partners, L.P. ("Gotham") with respect to its nominees for
election to the Board of Trustees of First Union Real Estate
Equity and Mortgage Investments (the "Company") pursuant to
Article I, Section 7(c) of the By-Laws of the Company. All of
such nominees have an understanding with Gotham whereby they have
agreed to be nominated to the Board of Trustees by Gotham, and to
serve on such Board if elected. In addition, Gotham has agreed to
indemnify each of the nominees for any liability incurred by such
nominee in connection with his or her nomination for election to
the Board of Trustees. None of the nominees has held any position
or office with the Company or with an entity affiliated with the
Company since January 1, 1993.
William A. Ackman
-----------------
Address: 150 Columbus Avenue, Apt. 4D, New York, New York 10023
Date of Birth: May 11, 1966 (age 31)
Citizenship: United States
Business Address: Gotham Partners Management Co. LLC, 110 East
42nd Street, 18th Floor, New York, New York 10017
Employment History: Since January 1, 1993, Mr. Ackman has been
the Vice President, Secretary and Treasurer of GPLP Management
Corp., the Managing Member of Gotham Partners Management Co. LLC,
an investment management firm (and the General Partner of its
predecessor entity). Mr. Ackman has been employed by Gotham
Partners Management Co. LLC and its predecessor entity since
January 1, 1993. Mr. Ackman was a general partner of Section H
Partners, L.P., the General Partner of the Gotham Partners, L.P.
and Gotham Partners II, L.P. investment funds, from January 1,
1993 through September 1993. Mr. Ackman has been the President,
Secretary and Treasurer of Karenina Corporation, a general
partner of Section H Partners, L.P. since October 1993.
Directorships Required to be Reported pursuant to Item 401(e)(2)
of Regulation S-K: None.
Involvement in Legal Proceedings Required to be Reported pursuant
to Item 401(f) of Regulation S-K: None.
Daniel J. Altobello
-------------------
Address: 9727 Avenel Farm Drive, Potomac, Maryland 20854
Date of Birth: February 28, 1941 (age 56)
Citizenship: United States
Business Address: ONEX Food Services, Inc., 6550 Rock Spring
Drive, Bethesda, Maryland 20817
Employment History: Mr. Altobello has been the Chairman of the
Board of ONEX Food Services, Inc., an airline catering company,
since September 1995. Mr. Altobello has been a partner in Ariston
Investment Partners, a consulting firm, since September 1995. Mr.
Altobello was the Chairman, President and Chief Executive Officer
of Caterair International Corporation, an airline catering
company, from January 1, 1993 until September 1995.
Directorships Required to be Reported pursuant to Item 401(e)(2)
of Regulation S-K: Mr. Altobello is a member of the Boards of
Directors of American Management Systems, Inc. and Colorado Prime
Corporation.
Involvement in Legal Proceedings Required to be Reported pursuant
to Item 401(f) of Regulation S-K: None.
David P. Berkowitz
------------------
Address: 2109 Broadway, New York, New York 10023
Date of Birth: March 10, 1962 (age 35)
Citizenship: United States
Business Address: Gotham Partners Management Co. LLC, 110 East
42nd Street, 18th Floor, New York, New York 10017
Employment History: Since January 1, 1993, Mr. Berkowitz has been
the President of GPLP Management Corp., the Managing Member of
Gotham Partners Management Co. LLC, an investment management firm
(and the General Partner of its predecessor entity). Mr.
Berkowitz has been employed by Gotham Partners Management Co. LLC
and its predecessor entity since January 1, 1993. Mr. Berkowitz
was a general partner of Section H Partners, L.P., the General
Partner of Gotham Partners, L.P. and Gotham Partners II, L.P.
investment funds, from January 1993 through September 1993. Mr.
Berkowitz has been the President, Secretary and Treasurer of DBP
Corporation, a general partner of Section H Partners, L.P. since
October 1993.
Directorships Required to be Reported pursuant to Item 401(e)(2)
of Regulation S-K: None.
Involvement in Legal Proceedings Required to be Reported pursuant
to Item 401(f) of Regulation S-K: None.
Stephen J. Garchik
------------------
Address: 9605 Sotweed Drive, Potomac, Maryland 20854
Date of Birth: March 12, 1954 (age 43)
Citizenship: United States
Business Address: The Evans Company, 8251 Greensboro Drive, Suite
850, McLean, Virginia 22102
Employment History: Since January 1, 1993, Mr. Garchik has been
the President of The Evans Company, a commercial real estate
development and management firm. Mr. Garchik has been the
Chairman of Florida Golf Partners, L.P., a golf course ownership,
operation and development enterprise, since July 1996.
Directorships Required to be Reported pursuant to Item 401(e)(2)
of Regulation S-K: None.
Involvement in Legal Proceedings Required to be Reported pursuant
to Item 401(f) of Regulation S-K: None.
David S. Klafter
----------------
Address: 119 Waverly Place, Apt. 3, New York, New York 10011
Date of Birth: February 24, 1955 (age 42)
Citizenship: United States
Business Address: Gotham Partners Management Co. LLC, 110 East
42nd Street, 18th Floor, New York, New York 10017
Employment History: Mr. Klafter has been an in-house counsel and
investment analyst at Gotham Partners Management Co. LLC, an
investment management firm, since April 1996. Mr. Klafter was
counsel at White & Case, a law firm, from January 1, 1993 until
December 1993, and a partner at White & Case from January 1994
until April 1996.
Directorships Required to be Reported pursuant to Item 401(e)(2)
of Regulation S-K: None.
Involvement in Legal Proceedings Required to be Reported pursuant
to Item 401(f) of Regulation S-K: None.
Richard A. Mandel
-----------------
Address: 28 Hilltop Road, Short Hills, New Jersey 07078
Date of Birth: September 1, 1962 (age 35)
Citizenship: United States
Business Address: Kennedy-Wilson International, 1270 Avenue of
the Americas, Suite 1818, New York, New York 10020
Employment History: Mr. Mandel has been the President of the
Brokerage Division of Kennedy-Wilson International, a real estate
brokerage and investment firm, since December 1996. From October
1993 until December 1996, Mr. Mandel was a Managing Director in
charge of the Asian Operations of Kennedy-Wilson International.
From January 1, 1993 until October 1993, he was a Director of
Jones Lang Wootton, a real estate brokerage firm.
Directorships Required to be Reported pursuant to Item 401(e)(2)
of Regulation S-K: Mr. Mandel is a member of the Board of
Directors of Kennedy-Wilson International.
Involvement in Legal Proceedings Required to be Reported pursuant
to Item 401(f) of Regulation S-K: None.
Daniel Shuchman
---------------
Address: 203 East 72nd Street, Apt. 7D, New York, New York 10021
Date of Birth: August 4, 1965 (age 32)
Citizenship: United States
Business Address: Gotham Partners Management Co. LLC, 110 East
42nd Street, 18th Floor, New York, New York 10017
Employment History: Mr. Shuchman has been an investment analyst
at Gotham Partners Management Co. LLC, an investment management
firm, since October 1994. Mr. Shuchman was an investment banker
at Goldman Sachs & Co., an investment banking firm, from January
1, 1993 until August 1994.
Directorships Required to be Reported pursuant to Item 401(e)(2)
of Regulation S-K: None.
Involvement in Legal Proceedings Required to be Reported pursuant
to Item 401(f) of Regulation S-K: None.
Steven S. Snider
----------------
Address: 1624 Foxhall Road, N.W., Washington, D.C. 20007
Date of Birth: December 31, 1956 (age 41)
Citizenship: United States
Business Address: Hale and Dorr LLP, 1455 Pennsylvania Avenue,
N.W., Washington, D.C. 20004
Employment History: Since January 1, 1993, Mr. Snider has been a
senior partner at Hale and Dorr LLP, a law firm.
Directorships Required to be Reported pursuant to Item 401(e)(2)
of Regulation S-K: None.
Involvement in Legal Proceedings Required to be Reported pursuant
to Item 401(f) of Regulation S-K: None.
Mary Ann Tighe
--------------
Address: 1320 York Avenue, Apt. 36B, New York, New York 10021
Date of Birth: August 24, 1948 (age 49)
Citizenship: United States
Business Address: Insignia/ESG, 200 Park Avenue, New York, New
York 10166
Employment History: Since January 1, 1993, Ms. Tighe has been an
Executive Managing Director and a member of the Executive and
Strategic Planning Committees of Insignia/ESG, a commercial real
estate firm.
Directorships Required to be Reported pursuant to Item 401(e)(2)
of Regulation S-K: None.
Involvement in Legal Proceedings Required to be Reported pursuant
to Item 401(f) of Regulation S-K: None.
James A. Williams
-----------------
Address: 3518 Franklin Road, Bloomfield Hills, Michigan 48382
Date of Birth: March 30, 1942 (age 55)
Citizenship: United States
Business Address: Williams, Williams, Ruby & Plunkett PC, 380 N.
Woodward Avenue, Suite 380, Birmingham, Michigan 48009
Employment History: Since January 1, 1993, Mr. Williams has been
the President of Williams, Williams, Ruby & Plunkett PC, a law
firm. Mr. Williams has also been the Chairman of Michigan
National Bank and Michigan National Corporation since November
1995.
Directorships Required to be Reported pursuant to Item 401(e)(2)
of Regulation S-K: None.
Involvement in Legal Proceedings Required to be Reported pursuant
to Item 401(f) of Regulation S-K: None.
Exhibit C
---------
Exhibit C states that the description of the Gotham Proposal
is to increase the number of Trustees on the Company's Board of
Trustees from its current composition of nine members to fifteen
members and to hold an election of Trustees to fill the
newly-created positions along with the three seats whose terms
are expiring. Exhibit C also reviews in its section on the
"Reasons for the Proposal" the correspondence between Gotham and
Gotham II and the Company and the performance of the Shares for
periods since Mr. Mastandrea became Chairman of the Company, and
states that in order to implement steps to maximize shareholder
value, Gotham is seeking majority representation on the Board of
Trustees at the Annual Meeting.
Gotham states that upon gaining majority representation on
the Company's Board of Trustees and after reviewing relevant
information about the business and operations of the Company, it
expects that the new board would propose changes in the
management of the Company, but that it had not identified new
management. In addition, after careful analysis of various
factors, in particular the value-maximization strategies of the
other paired-share REITs, the new board may cause the Company to
change its strategic direction, including, without limitation,
identifying a strategic partner or partners, pursuing
acquisitions in other real-estate-intensive operating businesses,
disposing of non-core assets and/or seeking the sale of the
Company in a single transaction or a series of transactions which
would preserve and maximize the value of the Company's
stapled-stock structure, although Gotham did not have any
specific plans regarding any of the foregoing.
Exhibit D
---------
Proponent Information
---------------------
The following is the information required to be given
pursuant to Article I, Sections 7(c)(iii), (iv) and (v) of the
By-Laws of First Union Real Estate Equity and Mortgage
Investments (the "Company") by a Beneficiary offering a
nomination or proposal:
1. Name and address of the Beneficiary making the proposal
or nomination (the "Proponent") as they appear in the share
transfer books of the Company: Gotham Partners, L.P., 110 East
42nd Street, New York, New York 10017
2. Name and address of any other Beneficiary known by the
Proponent to be supporting the nomination and proposal: Gotham
Partners II, L.P., 110 East 42nd Street, New York, New York 10017
3. The class and number of shares of Beneficial Interest of
the Company ("Shares") owned by the Proponent: Gotham Partners,
L.P. owns 1,998,301 Shares and holds an option to acquire 493,150
Shares.
4. The class and number of Shares owned by any Beneficiaries
described in paragraph 2 above: Gotham Partners II, L.P. owns
23,599 Shares and holds an option to acquire 6,850 Shares.
5. Any financial interest of the Proponent in the
Proponent's proposal: Gotham has no interest in the Proposal
other than its interest as an owner of Shares and an option to
acquire Shares.
Certification of Nominees
-------------------------
Pursuant to Article I, Section 7(c) of the By-Laws of First
Union Real Estate Equity and Mortgage Investments (the
"Company"), the undersigned, Gotham Partners, L.P., a Beneficiary
of the Company, hereby certifies that each of its nominees for
election to the Board of Trustees of the Company at the 1998
Annual Meeting of Beneficiaries of the Company (or any Special
Meeting of Beneficiaries held in lieu thereof), a list of whom is
attached hereto as Exhibit A, meets all the qualifications for
Trustees set forth in the Declaration of Trust of the Company,
including, but not limited to, Section 8.10 thereof.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate on this 8th day of January, 1998.
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.,
its general partner
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
----------------------
David P. Berkowitz
President
By: Karenina Corporation,
a general partner of Section H Partners, L.P.
By: /s/ William A. Ackman
-----------------------
William A. Ackman
President
Exhibit A
---------
Nominees
--------
William A. Ackman
Daniel J. Altobello
David P. Berkowitz
Stephen J. Garchik
David S. Klafter
Richard A. Mandel
Daniel Shuchman
Steven S. Snider
Mary Ann Tighe
James A. Williams
Certification of Proposal
-------------------------
Pursuant to Article I, Section 7 of the By-Laws of First
Union Real Estate Equity and Mortgage Investments (the
"Company"), the undersigned, Gotham Partners, L.P., a Beneficiary
of the Company, hereby certifies that its proposal to be brought
before the 1998 Annual Meeting of Beneficiaries of the Company
(or any Special Meeting of Beneficiaries held in lieu thereof), a
copy of which is attached as Exhibit A hereto, does not conflict
with or violate any provisions of the Declaration of Trust of the
Company.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate on this 8th day of January, 1998.
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.,
its general partner
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
----------------------
David P. Berkowitz
President
By: Karenina Corporation,
a general partner of Section H Partners, L.P.
By: /s/ William A. Ackman
---------------------
William A. Ackman
President
Exhibit A
---------
Proposal
--------
Gotham Partners, L.P. ("Gotham Partners"), a Beneficiary of
First Union Real Estate Equity and Mortgage Investments ("the
Company"), meeting the qualifications set forth in Article I,
Section 7 of the By-Laws of the Company, sets forth the following
proposal to be considered by the Beneficiaries of the Company at
the Company's 1998 Annual Meeting of Beneficiaries (or any
Special Meeting of Beneficiaries held in lieu thereof):
Proposed, in accordance with Article VIII, Section 8.1 of
the Company's Amended Declaration of Trust, dated July 25, 1986,
(i) that the number of Trustees constituting the full Board
of Trustees of the Company shall be determined at the 1998 Annual
Meeting of Beneficiaries of the Company (or any Special Meeting
of Beneficiaries held in lieu thereof) to be fixed at fifteen (an
increase of six members); and
(ii) that two of the newly-created seats of the Board of
Trustees of the Company be assigned to each of Class I, Class II
and Class III; and
(iii) that, at the 1998 Annual Meeting of Beneficiaries of
the Company (or any Special Meeting of Beneficiaries held in lieu
thereof), in addition to electing the three Trustees to fill the
seats of the three Trustees in Class II whose terms are expiring,
the Beneficiaries of the Company shall also elect six Trustees
(two Trustees to each of Class I, Class II and Class III) to
serve in the newly-created seats established in paragraph (ii)
above.
---------
On January 16, 1998, Mr. Levin sent the following letter to
Gotham:
Gotham Partners, L.P.
10 East 42nd Street
New York, New York 10017
Attn: Mr. David P. Berkowitz
Mr. William A. Ackman
Gentlemen:
The Board of Trustees (the "Board") of First Union Real
Estate Equity and Mortgage Investments (the "Trust") has received
your notice dated January 8, 1998 (the "Notice"), and, pursuant
to Article I, Section 7(d) of the By-Laws of the Trust, hereby
gives notice to Gotham Partners, L.P. that the Notice does not
satisfy the informational requirements of such Section and is
therefore deficient. Because Gotham's Notice is deficient, the
proposal and nominations contained in such Notice cannot be
presented for action at the 1998 Annual Meeting of Beneficiaries
of the Trust (the "Annual Meeting"). However, Gotham may provide
curative information to the Secretary of the Trust within five
(5) days from the date hereof.
As provided in Article I, Section 7(d) of the By-Laws,
Gotham's Notice must set forth as to each nomination or proposal
(i) the name and address of, and the class and number of shares
of the Trust's capital shares which are beneficially owned by,
any other beneficiaries of the Trust known by Gotham to be
supporting such nomination or proposal on the date of the Notice
and (ii) any financial interest of any such beneficiaries in such
proposal.
This notice addresses only those deficiencies in the
Notice that are capable of being cured. The Trust does not waive
any other requirements of the Declaration of Trust or By-Laws of
the Trust or any deficiencies that are not curable. The Board
reserves the right to omit from consideration at the Annual
Meeting any proposal or nomination that has not been properly
made.
Sincerely,
/s/ Paul F. Levin
-----------------
Paul F. Levin
Secretary
---------
On January 16, 1998, the Company issued the following press
release:
FIRST UNION FILES SUIT AGAINST GOTHAM
Cleveland, Ohio, January 16, 1998 -- First Union Real Estate
Investments (NYSE: FUR) today announced that it has filed a
lawsuit in the Common Pleas Court of Cuyahoga County, Ohio
against two Gotham Partners limited partnerships.
New York-based Gotham recently filed a notice with the Trust and
in a Schedule 13-D that it intends to nominate a slate of three
individuals to oppose incumbent Trustees, including its Chairman,
James C. Mastandrea, and Herman J. Russell and James M. Delaney,
for election to First Union's Board of Trustees at the Trust's
1998 Annual Shareholders' Meeting. Gotham also stated that it
intends to propose that the size of the Board be expanded from
nine to 15 members, and purports to nominate candidates for those
prospective new seats as well. First Union asserts in its
complaint that Gotham's proposals violate First Union's
Declaration of Trust and its By Laws, and could cause permanent
damage to the Trust and its shareholders.
Mastandrea stated, "We filed this lawsuit to protect the
integrity of our Declaration of Trust and minimize any potential
damage which may have been created."
First Union Real Estate Investments is a stapled-stock real
estate investment trust (REIT) and its shares are traded on the
New York Stock Exchange.
---------
On January 20, 1998, Gotham sent the following letter to Mr.
Levin:
Paul F. Levin, Esq.
Secretary
First Union Real Estate Equity
and Mortgage Investments
55 Public Square, Suite 1900
Cleveland, Ohio 44113-1937
Dear Mr. Levin:
In response to your letter notice to Gotham Partners, L.P.,
dated January 16, 1998, we note that your purported notice is
defective and ineffectual in at least three respects. First, your
letter notice states that, "As provided in Article I, Section
7(d) of the By-Laws, Gotham's notice must set forth as to each
nomination and proposal" certain information; but Section 7(d)
has no such requirement. Second, the Board of Trustees has failed
to identify, as required by Article I, Section 7(d) of the
By-Laws, the "material respect" in which Gotham Partners, L.P.'s
notice of nominations and proposal, dated January 8, 1998 (the
"Notice"), allegedly does not satisfy the information
requirements of Section 7(c). Third, Gotham Partners, L.P.'s
notice did respond to the requirements of Section 7(c) and,
therefore, your quoting those requirements in your letter is
inadequate to allow Gotham Partners, L.P. to correct any alleged
deficiency.
Notwithstanding the foregoing and without waiving any of our
rights, we hereby provide First Union Real Estate Equity and
Mortgage Investments ("First Union"), the following information:
1. Gotham Partners II, L.P., is known by Gotham Partners,
L.P. to support its nominations and proposal.
2. The address of Gotham Partners II, L.P. is 110 East 42nd
Street, 18th Floor, New York, New York 10017.
3. Gotham Partners II, L.P. is the owner of 23,599 shares of
Beneficial Interest of the Company, par value $1.00 per share
(the "Shares"), and holds an option to acquire 6,850 Shares.
4. Other than through its ownership of Shares described in
item 3, Gotham Partners II, L.P. has no financial interest in the
proposal referred to above.
5. Gotham Partners, L.P. does not have knowledge of any
other beneficiary of First Union supporting its nominations or
proposal as of the date of the Notice.
The foregoing is hereby incorporated by reference and made a
part of the notice.
Gotham Partners, L.P. believes that its Notice satisfies the
requirements of the Declaration of Trust and By-Laws of First
Union, including without limitation the informational
requirements of Article I, Section 7(c) of the By-Laws of First
Union. If this does not comport with the understanding of First
Union, we expect that you will provide immediate notice of that
position. If First Union does not comply with the preceding
sentence and attempts to omit the proposal or any of the
nominations made by Gotham Partners, L.P., from consideration at
the 1998 Annual Meeting of the Beneficiaries of First Union (or
any special meeting of Beneficiaries of First Union called in
lieu thereof), we intend to pursue all of our rights and
remedies.
Please direct all future correspondence relating to this
matter to both of our litigation counsel, Alexander R. Sussman at
Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, New York 10004, and David C. Weiner at Hahn, Loeser & Parks
LLP, 3300 BP America Building, 200 Public Square, Cleveland, Ohio
44114-2301.
Very truly yours,
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.,
its general partner
By: Karenina Corporation,
a general partner of Section H Partners, L.P.
By: /s/ William A. Ackman
---------------------
William A. Ackman
President
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
----------------------
David P. Berkowitz
President
---------
On January 20, 1998, Alexander R. Sussman of Fried, Frank, Harris,
Shriver & Jacobson, special counsel to Gotham and Gotham II, and David C.
Weiner of Hahn, Loeser & Parks LLP, co-counsel, sent a letter to Frances
Floriano Goins of Squire, Sanders & Dempsey, L.L.P., counsel to the
Company. Mr. Sussman and Mr. Weiner urged the Company to desist from what
they believed were entrenchment tactics and harassing litigation in
responding to the Gotham Proposal and the Gotham Nominations. The letter
continues as follows:
. . . Gotham I seeks to give First Union Beneficiaries/stock-
holders a choice about the company's future management, business
direction and value maximization strategy, by allowing stockholders
the option to vote for Gotham I's nominations and proposal. At a
minimum, it is obviously in the interest of First Union and all of
its stockholders to avoid unnecessary and wasteful costs and burdens
during the forthcoming proxy contest. We believe the contest should
be decided in a businesslike manner, with free stockholder choice,
full disclosure, and a vote on the merits of the Trustee candidates
and their plans for First Union.
Any disputes between the parties should be resolved without
litigation. If there is to be litigation, however, it should come
after the April 14 Annual Meeting and stockholder vote, in order
to avoid costly distraction during the proxy contest and
premature judicial consideration of issues that may be mooted by
the outcome of the contest. Accordingly, we are making the
following demands and taking the following actions:
1. As the first order of business, First Union's purported
"notice of deficiency" with respect to Gotham I's notice, dated
January 8, 1998 of Gotham I's nominations and proposal pursuant
to Article I, Section 7 of First Union's By-Laws ("Gotham I's
Notice"), must be resolved immediately. Despite Gotham I's
express request on page 2 of Gotham I's Notice that any questions
be addressed to Mr. Sussman, the "notice of deficiency" was sent
by Paul Levin, First Union's Secretary, in a letter to Gotham I,
dated January 16, 1998, and was referenced in a lawsuit filed on
that date, without any prior communication to Gotham I or to Mr.
Sussman.
We are enclosing a copy of Gotham I's letter response, dated
as of today, to Mr. Levin's unexplained statement that Gotham I's
Notice "does not satisfy the informational requirements of [First
Union's By-Laws] and is therefore deficient." As Gotham I's
letter explains, Mr. Levin's purported notice was defective and
ineffectual. Moreover, we believe that Gotham I's Notice was in
full compliance with the Trust and By-Laws as well as the
informational requirements of Article I, Section 7(c) of the
By-Laws. In any case, any information that was not provided was
immaterial and any purported deficiency was similarly immaterial
and did not require any further response.
According to Mr. Levin's letter, "Gotham may provide
curative information to the Secretary of the Trust within five
(5) days from the date hereof [January 16, 1998]." Since the cure
period ends tomorrow, Wednesday, January 21, 1998, we require that
you advise us by 2:00 p.m. today whether the Notice, as amended,
is deemed effective and not deficient by First Union. If you
cannot so advise me by that time, we ask that you be available
this afternoon at 2:00 p.m. to join us in a conference call with
the federal court (see Point 3 below), so that we may arrange for
a hearing to be held at the Court's convenience tomorrow,
Wednesday, January 21, 1998. At such hearing we plan to petition
the Court for appropriate relief to protect the Gotham
Partnerships from any claim that the informational requirements
of First Union's By-Laws have not timely been met.
2. This morning, the Gotham Partnerships have removed First
Union's state court lawsuit to the United States District Court
for the Northern District of Ohio, Eastern Division. Enclosed is
a copy of the Notice of Removal. There is diversity between the
parties and any litigation between First Union and the Gotham
Partnerships will be in the context of a proxy contest with proxy
violation claims subject to the federal court's exclusive
jurisdiction.
3. Despite our preference that disputes between the parties
either be resolved without court intervention or subsequent to
the vote at First Union's Annual Meeting, in order to protect the
Gotham Partnerships' rights, we have filed counterclaims in the
removed federal action. We are herewith serving the Answer and
Counterclaim along with our initial discovery requests.
4. As set forth in our federal counterclaims, First Union's
management and Trustees have a fiduciary obligation to act in a
manner consistent with the interests of First Union and its
stockholders. While we have not named any individual counterclaim
defendants, we reserve the Gotham Partnerships' right to do so
should any individuals violate their fiduciary duties to the
Trust and its stockholders.
We look forward to hearing from you before 2:00 p.m. today,
as requested above.
Sincerely,
/s/ Alexander R. Sussman /s/ David C. Weiner
------------------------ -------------------
Alexander R. Sussman David C. Weiner
---------
On January 20, 1998, Mr. Levin sent the following letter to Gotham:
Gotham Partners, L.P.
110 East 42nd Street, 18th Floor
New York, New York 10017
Attn: Mr. David P. Berkowitz
Mr. William A. Ackman
Gentlemen:
In response to your letter dated January 20, 1998 and its
attempt to cure deficiencies in providing information required by
Article I, Section 7(c) of First Union's By-Laws, the Notice (as
defined in your letter) continues to be deficient in not
identifying limited partners and other Beneficiaries and
beneficial owners who support Gotham's proposal and nominations.
Sincerely,
/s/ Paul F. Levin
-----------------
Paul F. Levin
Secretary
---------
On January 21, 1998, Gotham sent the following letter to the Secretary
of the Company:
Paul F. Levin, Esq.
Secretary
First Union Real Estate Equity
and Mortgage Investments
55 Public Square, Suite 1900
Cleveland, Ohio 44113-1937
Dear Mr. Levin:
We are in receipt of your letter of January 20, 1998, in
which you contend that the notice of nominations and proposal
submitted by Gotham Partners, L.P. ("Gotham"), dated January 8,
1998 (the "Notice"), as supplemented by Gotham's letter, dated
January 20, 1998, does not satisfy the informational requirements
of Article I, Section 7(c) ("Section 7(c)") of First Union's
By-Laws, because it allegedly "continues to be deficient in not
identifying limited partners and other Beneficiaries and
beneficial owners who support Gotham's proposal and nominations."
Gotham continues to believe that your notice of deficiencies is
defective and ineffectual and that Gotham's Notice satisfies the
requirements of Section 7(c).
Notwithstanding the foregoing and without waiving any of our
rights, to the extent you are making a technical objection to our
Notice, we hereby provide First Union the additional information
attached hereto as Exhibit A.
To the extent First Union's position results from its
disbelieving our certification that Gotham Partners II, L.P. is
the only "other Beneficiar[y] known by such Beneficiary [Gotham]
to be supporting [Gotham's] nomination or proposal on the date of
such Beneficiary's notice," which is the information required by
Section 7(c), we would like to reconfirm that, as of the date of
the Notice and as of today's date, Gotham has no knowledge of any
Beneficiary or beneficial owner of any Shares, other than the
Shares beneficially owned by Gotham and Gotham II as set forth on
Exhibit A hereto, that is known to be supporting its nominations
or proposal.
We request your confirmation that Gotham has satisfied
Section 7(c)'s informational requirements.
If you still contend that our Notice and the additional
information we have provided today and yesterday is somehow
deficient, we request that you provide immediate notice of that
position and additional time to cure.
If First Union does not confirm that Gotham's Notice
complies with Section 7(c), Gotham reserves all of its rights and
remedies and will seek appropriate relief, if and when required,
in the pending federal court action.
Very truly yours,
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.,
its general partner
By: Karenina Corporation,
a general partner of Section H Partners, L.P.
By: /s/ William A. Ackman
---------------------
William A. Ackman
President
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
----------------------
David P. Berkowitz
President
Exhibit A
---------
We hereby provide First Union Real Estate Equity and
Mortgage Investments ("First Union"), the following information,
which shall be incorporated and made a part of the notice (the
"Notice") of Gotham Partners, L.P. ("Gotham") to First Union
relating to its proposal and nominations for consideration at
First Union's 1998 Annual Meeting of Beneficiaries (or any
special meeting held in lieu thereof):
Gotham is the record and beneficial owner of 100 shares of
Beneficial Interest, par value $1.00, of First Union (the
"Shares"), and the beneficial owner of an additional 2,491,351
Shares (including an option to purchase 493,150 Shares). Gotham
Partners II, L.P. ("Gotham II") is the beneficial owner of 30,449
Shares (including an option to purchase 6,850 Shares). The option
agreements in connection with the options to acquire Shares held
by Gotham and Gotham II are attached as exhibits to the Schedule
13D of Gotham and Gotham II, as amended, which is incorporated
herein by reference. Cede & Co. is the record owner of the Shares
of which Gotham is the beneficial owner and not the record owner,
and is the record holder of all of the Shares of which Gotham II
is the beneficial holder. The address of Cede & Co. is 55 Water
Street, New York, New York 10041-0099. Gotham and Gotham II
intend to instruct Cede & Co. to vote such Shares held of record
by Cede & Co. in favor of the proposal and nominations presented
in the Notice. In addition, we note the following: the general
partner of Gotham is Section H Partners, L.P. The general
partners of Section H Partners, L.P. are Karenina Corporation and
DPB Corporation. William A. Ackman is the President and sole
shareholder of Karenina Corporation. David P. Berkowitz is the
President and sole shareholder of DPB Corporation. In such
indicated capacities, Section H Partners, L.P., Karenina
Corporation, DPB Corporation, William A. Ackman and David P.
Berkowitz may be deemed to be beneficial owners of the Shares
described above as beneficially held by Gotham and Gotham II. All
of such entities and persons support the nominations and proposal
made by Gotham in the Notice, and the address of each of such
entities and persons is care of 110 East 42nd Street, 18th Floor,
New York, New York 10017. Other than through their respective
interests in the Shares described above, none of such entities or
persons has any financial interest in the proposal set forth in
the Notice or is a Beneficiary or beneficial owner of any other
Shares.
Except as described herein and in the Notice, Gotham has no
knowledge of any Beneficiary or beneficial owner of Shares that
was known to be supporting its proposal and nominations as of the
date of the Notice or is known to be supporting its proposal and
nominations as of today's date.
In addition, although we do not believe that the By-Laws of
First Union require us to disclose the following information to
First Union, in response to your letter, dated January 20, 1998,
Gotham states that it does not have any knowledge of any limited
partner of Gotham or Gotham II who supported Gotham's proposal
and nominations on the date of the Notice, or, indeed, who
supports such proposal and nominations as of today, other than
those limited partners who are also nominees of Gotham. David S.
Klafter and Daniel Shuchman are limited partners of Section H
Partners, L.P. and of Gotham. Mary Ann Tighe and James A.
Williams are limited partners of Gotham. None of such persons are
Beneficiaries or beneficial owners of any Shares.
The Notice and supplements thereto provided by Gotham to
First Union assume that the definition of the term "beneficial
ownership" is that contained in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended. If this is not the case, you
should inform us immediately of such other definition used by
First Union.
---------
On January 30, 1998, Gotham sent the following letter and
certificate to the Secretary of the Company.
Paul F. Levin, Esq.
Secretary
First Union Real Estate Equity
and Mortgage Investments
55 Public Square, Suite 1900
Cleveland, Ohio 44113-1937
Dear Mr. Levin:
Gotham Partners, L.P. ("Gotham") is a holder of record of
shares of Beneficial Interest, par value $1.00 per share
("Shares"), of First Union Real Estate Equity and Mortgage
Investments (the "Company"), and is entitled to vote its Shares
at the 1998 Annual Meeting of Beneficiaries of or any special
meeting held in lieu thereof (the "Annual Meeting"). In
connection with its proposal and nominations to be presented for
consideration at the Annual Meeting, Gotham hereby requests that,
pursuant to Rule 14a-7 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the Company elect
to either provide Gotham with a list of all of the record holders
of Shares (in such form as is required by Rule 14a-7 and as is
set forth below) or to mail Gotham's soliciting materials
(including proxy statements, forms of proxy and other soliciting
materials to be furnished by Gotham) to the record holders of
Shares. The Company is required to notify Gotham of its election
within five business days of the date hereof.
In the event that the Company elects to provide Gotham with
a list of the record holders of Shares, Gotham hereby requests,
and the Company is required to deliver to Gotham within five
business days of the date hereof, (i) a reasonably current list
of the names, addresses and security positions of all of the
record holders, including banks, brokers and similar entities,
holding Shares and other securities of the Company in the same
class or classes as holders which have been or are to be
solicited on management's behalf; and (ii) the most recent list
of names, addresses and security positions of beneficial owners
as specified in Rule 14a-13(b) promulgated under the Exchange
Act, in the possession of the Company, or which subsequently
comes into the possession of the Company. In addition, if the
Company makes this election, the Company shall furnish Gotham
with updated record holder information on a daily basis or, if
not available on a daily basis, at the shortest reasonable
interval, through the record date of the Annual Meeting.
In the event that the Company elects to mail Gotham's
soliciting materials, the Company shall mail copies of any proxy
statement, form of proxy or other soliciting material furnished
by Gotham to all of the record holders of Shares, including
banks, brokers or similar entities. The Company is required to
mail a sufficient number of copies to the banks, brokers and
similar entities for distribution to all beneficial owners of
Shares. The Company is further required to mail Gotham's
materials with reasonable promptness after tender of the material
to be mailed, envelopes or other containers therefor, postage or
payment for postage and other reasonable expenses of effecting
such mailing.
Gotham also requests, pursuant to clause (a)(1) of Rule
14a-7, that the Company provide Gotham with the following
information within five business days of the date hereof:
(i) a statement of the approximate number of record holders
and beneficial holders of the Company's securities, separated by
type of holder and class, owning Shares or other securities in
the same class or classes as holders which have been or are to be
solicited on management's behalf; and
(ii) the estimated cost of mailing a proxy statement, form
of proxy or other communication to such holders, including to the
extent known or reasonably available, the estimated costs of any
bank, broker, and similar person through whom the Company has or
intends to solicit beneficial owners in connection with the
Annual Meeting.
Enclosed herewith is the certification of Gotham given
pursuant to clause (c)(2) of Rule 14a-7.
Very truly yours,
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.,
its general partner
By: Karenina Corporation,
a general partner of Section H Partners, L.P.
By: /s/ William A. Ackman
---------------------
William A. Ackman
President
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
----------------------
David P. Berkowitz
President
Certificate
-----------
The undersigned, Gotham Partners, L.P. ("Gotham"), hereby
certifies as follows:
1. The list of security holders of First Union Real Estate
Equity and Mortgage Investments (the "Company") which Gotham has
requested from the Company will be used to solicit proxies in
connection with its proposal and nominations to be presented for
consideration at the 1998 Annual Meeting of Beneficiaries of the
Company or any special meeting held in lieu thereof (the "Annual
Meeting"), which are set forth in Gotham's Notice to the
Secretary of the Company dated January 8, 1998.
2. Gotham will not use the information contained in such
list of security holders for any purpose other than to
communicate with or solicit security holders regarding the Annual
Meeting.
3. Gotham will not disclose the information contained in
such list of security holders to any person other than an
employee or agent of Gotham to the extent necessary to effectuate
such communication or solicitation.
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.,
its general partner
By: Karenina Corporation,
a general partner of Section H Partners, L.P.
By: /s/ William A. Ackman
---------------------
William A. Ackman
President
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
----------------------
David P. Berkowitz
President
---------
On February 2, 1998, the Secretary of the Company sent the following
letter to Gotham and Gotham II:
Gotham Partners, L.P.
Gotham Partners II, L.P.
110 East 42nd Street, 18th Floor
New York, New York 10017
Attn: Mr. David P. Berkowitz
Mr. William A. Ackman
Gentlemen:
As you know, the Board of Trustees of First Union Real
Estate Equity and Mortgage Investments ("First Union") has
determined that securities of First Union claimed to be owned by
you constitute "Excess Securities" pursuant to First Union's
Declaration of Trust and By-Laws. Despite the fact that the
holders of Excess Securities have no right to dividends, you may
receive funds representing the dividend declared on December 3,
1997 due to certain agreements between Depository Trust Company
and its members and various transfer agents.
In accordance with the provisions of First Union's By-Laws,
you have no right to any such dividend payments for so long as
you hold Excess Securities, and you hold such payments as agent
for First Union. This result applies to the November payment as
well. Any transfer by you of these payments to your limited
partners will be at your risk and in violation of the Declaration
of Trust.
Sincerely,
/s/ Paul F. Levin
------------------
Paul F. Levin
Senior Vice President,
General Counsel and Secretary
---------
On February 3, 1998, the Secretary of the Company sent the following
letter to William A. Ackman and David P. Berkowitz:
William A. Ackman
David P. Berkowitz
Gotham Partners, L.P.
110 East 42nd St., 18th Floor
New York, NY 10017
Gentlemen:
In response to your request that First Union notify Gotham
whether First Union will provide Gotham a shareholder list or
mail Gotham's soliciting materials, First Union has no plans to
do either.
As you know, First Union's Board of Trustees has determined,
pursuant to the Declaration of Trust and By-Laws, that Gotham's
shares are "Excess Securities." As provided in Article VI,
Section 6 of the By-Laws:
As the equivalent of treasury Securities for such
purposes, the Excess Securities shall not be entitled
to any voting rights; shall not be considered to be
outstanding for quorums or voting purposes; and shall
not be entitled to receive interest or any other
distribution with respect to the Securities.
Consequently, under the Declaration of Trust and By-Laws, your
Excess Securities are really treasury shares and are outside the
coverage of Regulation 14(a)-7.
Very truly yours,
/s/ Paul F. Levin
-----------------
Paul F. Levin
---------
On February 3, 1998, James C. Mastandrea sent the following letter to
William A. Ackman and David P. Berkowitz:
Mr. William A. Ackman
Mr. David P. Berkowitz
Gotham Partners, L.P.
110 East 42nd Street, 18th Floor
New York, NY 10017
Gentlemen:
As you are aware, the Clinton budget proposal has already had a
dramatic impact on paired share REITs and certainly has the
potential to alter any plans either of us might have had for
First Union. As Chairman, I am concerned that our shareholders
have seen the value of their First Union holdings negatively
impacted since the beginning of the year. According to newspaper
accounts, the publicity generated in connection with last year's
takeover battle involving Starwood and ITT contributed to a
climate of controversy where negative points of view regarding
the paired share provision found their way into the media and now
into proposed tax policy.
Recognizing that some of the extraordinary opportunities
available to First Union may be eliminated in the next few
months, we have very little time to make investments that will be
advantageous by utilizing our structure.
While I don't intend to comment on the merits of your intended
proxy fight, it is obvious that it will be time consuming and
costly to both of us and only serve to distract us as the window
of opportunity closes. The relevance of a proxy contest and its
attendant litigation pales next to our mutual concern about
shareholder values.
I believe that we should meet to determine if our concerns
regarding the budget proposal merit our working together in the
brief time remaining, and if all of the shareholders' interests
might best be addressed by cooperation rather than protracted and
costly litigation. I have asked our attorneys to postpone further
filings to give us a chance to meet, and look forward to hearing
from you tomorrow afternoon, no later than 5:00 p.m. Otherwise, I
must assume that our present course is your preference.
Very truly yours,
/s/ James C. Mastandrea
-------------------------------
James C. Mastandrea
Chairman and Chief Executive Officer
---------
On February 5, 1998, Gotham and Gotham II stated in the seventeenth
amendment to the Schedule 13D relating to their interest in the Company
that the meeting requested by Mr. Mastandrea's February 3, 1998 letter to
Messrs. Ackman and Berkowitz took place on February 4, 1998.
CERTAIN LITIGATION
On January 16, 1998, the Company filed a civil action against Gotham
and Gotham II in the Court of Common Pleas, Cuyahoga County, Ohio,
captioned First Union Real Estate Equity and Mortgage Investments v. Gotham
Partners, L.P., et al., Case No. 347063. The Company alleges, among other
things, that Gotham has failed to provide information requested of it
pursuant to the Company's Declaration of Trust and By-Laws, and that
therefore Gotham's Shares should be deemed to be Excess Securities under
the Company's By-Laws. Under the Company's By-Laws, Shares that are deemed
to be Excess Securities are not entitled to any voting rights, not
considered to be outstanding for quorum or voting purposes and are not
entitled to receive dividends. The Company claims that because Gotham's
Shares were Excess Securities at the time Gotham made the Gotham Proposal
and the nomination of the Gotham Nominees, Gotham was not entitled to
present them or any other matter for consideration at the Annual Meeting.
In addition, the Company's complaint alleges that Gotham has failed to
comply with certain provisions of the By-Laws, by not disclosing other
shareholders who support the Gotham Proposal and the Gotham Nominees and
the holdings of those supporters. The Complaint further alleges that Gotham
has failed to disclose the Gotham Nominees' purported financial interests
in the Gotham Proposal. Specifically, the Complaint alleges that Gotham
failed to disclose that one of the Gotham Nominees, Daniel J. Altobello,
has a financial interest in the Gotham Proposal because he is an executive
of an entity affiliated with certain entities that are parties to a
"Put-Call Agreement" with the Company. See "Possible Effects of the
Adoption of the Gotham Proposal and the Election of the Gotham Nominees"
and "Schedule I." Paragraph 38 of the Complaint further alleges that the
Gotham Nominees are unqualified to serve as Trustees because they own "more
than 1% of the securities of, or [are] otherwise affiliated with another
[real estate investment trust], or own more than 1% of the securities of,
or [are] otherwise affiliated with any real estate company that competes
with" the Company for investments.
Gotham believes that the Company's allegations and claims are without
merit, and Gotham intends to vigorously defend against such allegations and
claims.
The complaint seeks, among other things, preliminary and permanent
declaratory and injunctive relief to (i) determine that Gotham and Gotham
II's Shares be deemed Excess Securities that have no voting rights and may
not be considered for quorum or voting purposes; (ii) declare null and void
the Gotham Proposal and the nomination of the Gotham Nominees; and (iii)
prohibit Gotham and Gotham II from supporting or soliciting proxies on
behalf of the Gotham Proposal or the Gotham Nominees. If the Company
obtains a court order granting the declaratory and injunctive relief it is
seeking, the Gotham Proposal and Gotham's nominations could not be brought
before the Beneficiaries at the Annual Meeting. Gotham believes that the
Company is not entitled to any relief.
On January 20, 1998, Gotham removed the Company's action from the
Court of Common Pleas for Cuyahoga County, Ohio, to the United States
District Court for the Northern District of Ohio, where it was assigned
Case No. 98CV105. On that date, Gotham also filed an answer and asserted
counterclaims, which were amended on January 23, 1998, against the Company
seeking, among other things, injunctive relief prohibiting the Company from
interfering with Gotham's submission of the Gotham Proposal and the
nomination of the Gotham Nominees for a vote at the Annual Meeting. The
counterclaims allege, among other things, that the Company has violated the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), by: (i)
actively soliciting proxies in violation of the filing requirements of the
SEC proxy rules; (ii) interfering with Gotham's right as security holder to
present nominations and proposals; and (iii) interfering with Gotham's
right as a security holder to vote its Shares. The counterclaims also
allege that the Company's management and Trustees have violated their
fiduciary duty to shareholders by wasting assets and seeking to entrench
the position of the Company's current officers and management. Gotham
seeks, among other things, court relief that would (i) enjoin further
violations by the Company of the Exchange Act and SEC proxy rules; (ii)
declare that the Gotham Proposal and the nomination of the Gotham Nominees
may be presented at the Annual Meeting for a vote by the Beneficiaries; and
(iii) declare that Gotham is in compliance with the SEC proxy rules and the
terms of the Company's Declaration of Trust and By-Laws.
Also on January 20, 1998, subsequent to Gotham's removal of the
Company's action to the United States District Court, the Company filed a
motion in state court for an order awarding the preliminary declaratory and
injunctive relief it seeks in its Complaint pending a final determination
by the state court. The state court scheduled a hearing on the Company's
motion for February 10, 1998.
On January 21, 1998, the Company filed a motion in the United States
District Court for an order remanding the litigation to state court. The
Company concurrently filed a motion for an expedited hearing on its motion
to remand the matter to state court.
On January 23, 1998, Gotham filed a motion in the federal court for an
order granting preliminary injunctive relief on certain of its
counterclaims. Gotham also requested that the hearing on the Company's
motion to remand and on the Company's and Gotham's preliminary injunction
motions be scheduled on or before March 10, 1998.
On January 30, 1998, Gotham filed a separate civil action against
First Union in the United States District Court for the Northern District
of Ohio, where it was assigned Case No. 98CV272. Gotham's complaint asserts
essentially the same claims as those asserted in its counterclaims against
the Company. Gotham filed the new action because a substantial question
arose regarding whether the federal court would remand the Company's action
to state court. On that date, Gotham also filed a motion in the new action
for an order granting preliminary injunctive relief on certain of its
claims, and a motion for expedited discovery.
On February 5, 1998, the Company filed an answer to Gotham's complaint
filed January 30, and asserted counterclaims, which were amended on
February 10, 1998, against Gotham alleging, among other things, that Gotham
has violated state law by maliciously interfering with the Company's
business relationships and business opportunities and by making false and
misleading statements about the Company. The counterclaims also allege that
Gotham has violated the Exchange Act by: (i) making false and misleading
statements about material facts in documents filed with the Commission; and
(ii) inappropriately using inadequate Schedule 13D filings as unlawful
proxy solicitations. The Company's counterclaims seek, among other things,
damages based on Gotham's alleged malicious interference and
misrepresentation, and preliminary and permanent injunctive relief for
Gotham's alleged violations of the Exchange Act.
Gotham believes that the Company's allegations and claims in its
counterclaims are without merit, and Gotham intends to vigorously defend
against such allegations and claims.
On February 11, 1998, the federal court remanded the Company's action
to state court, on the grounds that certain trustees of the Company share
Ohio citizenship with a limited partner of a limited partnership that is
itself a limited partner of Gotham.
On February 12, 1998, Gotham filed a motion in state court for a stay
of the Company's action pending final resolution of the action filed by
Gotham in federal court on January 30, 1998.
On February 17, 1998, the Company filed a motion in Gotham's federal
court action for an order dismissing Gotham's complaint. Among the
Company's arguments in its motion are that: (i) Gotham does not have
standing to assert the Exchange Act claims in its complaint; (ii)
abstention principles require the federal court to dismiss Gotham's federal
action in deference to the state court action; (iii) Gotham's Exchange Act
claims are not ripe for review by the federal court; (iv) three of the
counts in Gotham's complaint are premised entirely upon the Company's
filing of its state court complaint and do not, as a matter of law, state a
claim upon which relief may be granted; (v) Gotham's breach of fiduciary
duty claim is an invalid, improperly pled derivative claim; (vi) Gotham's
declaratory judgment count is identical to the Company's state court
complaint; and (vii) two of Gotham's Exchange Act claims fail to state
claims upon which relief can be granted.
On February 18, 1998, the Company filed a motion in state court for an
order dismissing certain of Gotham's counterclaims. The Company asserts in
its motion that: (i) Gotham's federal securities law claims should be
dismissed by the state court because they are within the exclusive
jurisdiction of the federal courts; (ii) Gotham's claim that the Company
has violated its Declaration of Trust is premised entirely upon the
Company's filing of its state court complaint and does not, as a matter of
law, state a claim upon which relief may be granted; and (iii) Gotham's
breach of fiduciary duty claim is an invalid, improperly pled derivative
claim.
Gotham believes that the Company's arguments in its motions to dismiss
are without merit.
The state court convened a hearing on the Company's preliminary
injunction motion on March 2, 1998. On March 5, 1998, the state court
adjourned the hearing until March 11, 1998.
On February 19, 1998, and March 6, 1998, the federal court conducted
status conferences. It is expected that a hearing will be held following
the issuance of a ruling in the state court hearing.
POSSIBLE EFFECTS OF THE ADOPTION OF THE GOTHAM PROPOSAL
AND THE ELECTION OF THE GOTHAM NOMINEES
Based upon the publicly available information concerning the Company,
the following would be consequences of the approval of the Gotham Proposal
and the election of the Gotham Nominees.
Mastandrea Employment Agreement. In July 1994, the Company entered
into an Employment Agreement with Mr. Mastandrea. The Agreement has an
initial three-year term and is extended automatically for additional
one-year terms unless one of the parties gives notice of an intention not
to renew.
The agreement with Mr. Mastandrea provides that he will have the
titles, and perform the duties, of Chairman of the Board of Trustees,
Chairman of the Executive Committee of the Board of Trustees, and President
and Chief Executive Officer of the Company. Under the agreement, Mr.
Mastandrea receives an annual base salary of not less than $250,000,
subject to annual review and adjustment by the Board of Trustees; health
and welfare benefits; participation in the Company's 1994 Long Term
Incentive Performance Plan; and split-dollar life insurance in the benefit
amount of $2,500,000. According to the Company's Preliminary Proxy
Statement, Mr. Mastandrea's total salary, bonus and other cash compensation
for the Company's 1997 fiscal year was $585,416. In addition, he was
awarded 228,390 restricted Shares (valued at $3,471,428 at the date of
grant) and options to acquire 225,000 Shares (valued in the "Option Grants
in Last Fiscal Year" table of the Company's Preliminary Proxy Statement at
$765,421 based on 5% annual appreciation and $1,833,316 based on 10% annual
appreciation), and received $13,094 in other compensation. Added together,
these amounts equal $4,835,359 or $5,903,254 of compensation for Mr.
Mastandrea in 1997, depending on which option appreciation assumption is
used.
The premiums on the split-dollar life insurance were set with the
expectation that, if Mr. Mastandrea continues to work for the Company until
he attains age 65, the cash surrender value of the policy will be
sufficient to fund (1) the return to the Company of all premiums paid by it
and (2) paid-up insurance on the life of Mr. Mastandrea in the amount of
$2,500,000.
The employment of Mr. Mastandrea may be terminated at any time.
However, if the Company terminates the employment of Mr. Mastandrea without
cause (as defined in the Agreement), or if he terminates his employment for
good reason (as defined in the Agreement), the Company is required to
continue to pay his base salary and bonus and to provide benefits,
including pension contributions and vesting of options, for a period of
three years, unless he earlier dies or attains age 65. A portion of the
Shares of restricted stock previously granted to Mr. Mastandrea would also
vest.
It is expected that Mr. Mastandrea's employment with the Company will
be terminated with or without cause by the Company, or with or without good
reason by Mr. Mastandrea, if the Gotham Proposal is adopted and the Gotham
Nominees are elected. If termination by the Company without cause or
termination by Mr. Mastandrea with good reason occurs after a change in
control or shift in ownership (which would include the adoption of the
Gotham Proposal and the election of the Gotham Nominees), in addition to
the provisions described in the preceding paragraph, the base salary, bonus
and pension contributions payable to Mr. Mastandrea following termination
become due immediately in lump sum, and all grants under the 1994 Long Term
Incentive Performance Plan become fully vested.
In the event a change in ownership or control of the Company occurs
within the meaning of Section 280G of the Internal Revenue Code (the
"Code"), the aggregate amount payable to Mr. Mastandrea will be limited to
the maximum amount that may be deducted for federal income tax purposes
without constituting "excess parachute payments" under Section 280G. In
addition, Mr. Mastandrea has agreed to defer the receipt of payments that
would otherwise not be deductible due to the $1,000,000 limit under Section
162(m) of the Code.
Senior Notes. Pursuant to the terms of the Indenture, dated as of
September 1, 1993, between the Company and Society National Bank, as
Trustee (the "Indenture"), under which the Company's 8 7/8% Senior Notes
due 2003 (the "Senior Notes") were issued, upon (i) the "change of control"
of the Company (as defined in the Indenture), which would include the
approval of the Gotham Proposal and the election of the Gotham Nominees,
and (ii) the occurrence of a specified rating decline of the Senior Notes
by Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc.
("Moody's") within ninety days following such a "change of control", the
holders of such Senior Notes would have the right to require the Company to
repurchase all or any part of such Senior Notes at a price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon. Interest on the Senior Notes at the rate of 8 7/8% per
annum is payable semi-annually on April 1 and October 1. If the Senior
Notes are rated by either S&P or Moody's as investment grade, the specified
decline in rating means a decline in such rating to below investment grade.
If the Senior Notes are rated below investment grade by both S&P and
Moody's, the specified decline means any decline in such rating by either
S&P or Moody's. Gotham believes that the adoption of the Gotham Proposal
and the election of the Gotham Nominees will not result in such a specified
decline in the ratings of the Senior Notes or the exercise of the right to
have the Company repurchase the Senior Notes. If the ratings of the Senior
Notes decline and the holders of the Senior Notes exercise this right,
Gotham believes that the Company would be able to refinance the Senior
Notes without a material adverse effect on the financial position of the
Company. The outstanding aggregate principal amount under the Senior Notes
is $100,000,000.
Impark Put-Call Agreement. In connection with the acquisition of
Imperial Parking Ltd. ("Impark") on April 17, 1997, the Company's
affiliated management company acquired approximately 67% of Impark's voting
common stock, and Impark's former owners received non-voting common stock
of Impark. The holders of the non-voting common stock issued to the former
owners of Impark have the right (but not the obligation) to cause the
Company to purchase such stock at an escalating price during certain
periods following the occurrence of "trigger events" (as defined in such
agreement), which would include the adoption of the Gotham Proposal and the
election of the Gotham Nominees, or after approximately 30 months have
passed following April 17, 1997 (although the Company has the right to
extend the closing date of such purchase for six months upon the payment of
a fee to such holders). According to the Company's Prospectus Supplement,
dated May 28, 1997, to the Company's Prospectus, dated October 7, 1996, in
connection with the offering of 5,500,000 Shares, the purchase price
payable in respect of such right increases from the aggregate issue price
as of April 17, 1997 of approximately $10.6 million at an 8% per annum rate
on the outstanding amount for the first six months and compounded by an
additional one percentage point per annum each six month period thereafter
up to a maximum rate of 17% per annum.
Impark Credit Agreement. The adoption of the Gotham Proposal and the
election of the Gotham Nominees would constitute a "collateralization
event" under the Ancillary Agreement, dated April 17, 1997, between BT Bank
of Canada ("BT"), Hong Kong Bank of Canada ("HKB") and the Company (the
"Impark Ancillary Agreement"). Pursuant to such agreement, upon the
occurrence of a "collateralization event", BT and HKB have the right to
require the Company to deliver to a trustee United States or Canadian
government bonds representing the outstanding amount of borrowings under
the Amended and Restated Credit Agreement, dated April 17, 1997, between
Impark, 504463 N.B. Inc. and BT. In the event that BT and HKB exercise such
right, Gotham believes that Impark would either collateralize or refinance
its borrowings and that Impark could refinance such borrowings without a
material adverse effect on the financial position of the Company. The total
aggregate amount of borrowings that may be outstanding at any time under
such Credit Agreement is Canadian $50,000,000.
Company Credit Agreement. In response to discovery requests made in
connection with the litigation between the Company and Gotham, the Company
has provided to Gotham an unsigned copy of the Amended and Restated Credit
Agreement, dated as of November 1, 1997, among the Company, First Union
Management, Inc., the lending institutions named therein, Keybank National
Association, as Documentation Agent, Bankers Trust Company, as Syndication
Agent, and National City Bank, as Administrative Agent (the "Company Credit
Agreement"). The Company Credit Agreement provides that if (i) a
collateralization event occurs under the Impark Ancillary Agreement and
such event is not waived as provided for therein (see "Impark Credit
Agreement" above), and (ii) lenders holding 66 2/3% of the then outstanding
loans and unutilized commitments under the Company Credit Agreement (the
"Required Lenders") determine in their reasonable judgment that as a result
of such a collateralization event, the Company's ability to refinance its
obligations under the Company Credit Agreement is materially adversely
affected, then the Required Lenders may terminate the Company Credit
Agreement and declare all principal and accrued interest thereunder
immediately due and payable. Gotham does not believe that the occurrence of
a collateralization event under the Impark Ancillary Agreement would
materially adversely affect the Company's ability to refinance its
obligations under the Company Credit Agreement. The total aggregate amount
of borrowings that may be outstanding at any time under the Company Credit
Agreement is $125,000,000.
1994 Option Plan. Under the Company's 1994 Long Term Incentive
Performance Plan (the "1994 Plan"), a "change of control" (as defined in
the 1994 Plan), which would include the adoption of the Gotham Proposal and
the election of the Gotham Nominees, would cause (i) all stock appreciation
rights and stock options outstanding under the 1994 Plan to become fully
exercisable, (ii) all restrictions and conditions applicable to restricted
Share awards under the 1994 Plan to be deemed satisfied, (iii) all cash
awards under the 1994 Plan to be deemed to have been fully earned, and (iv)
the term of all loans granted under the 1994 Plan to fund the exercise
price of awards to be extended for twenty years. According to the Company's
Proxy Statement in connection with the 1997 Annual Meeting of
Beneficiaries, as of December 31, 1996, options on 494,880 Shares with
exercise prices ranging from $6.375 to $7.75 and 427,500 restricted Shares
granted under the 1994 Plan were outstanding.
Change in Control Agreements. According to the Company's Preliminary
Proxy Statement, the Company has entered into new agreements (each, a
"Change in Control Agreement") with five executive officers (James C.
Mastandrea, Steven M. Edelman, Paul F. Levin, John J. Dee and Thomas T.
Kmiecek) and certain senior officers and key employees of the Company. Each
Change in Control Agreement provides that in the event such executive's or
employee's employment with the Company is terminated within two years
following a "change in control" of the Company (as defined in the Change in
Control Agreement), which would include the adoption of the Gotham Proposal
and the election of the Gotham Nominees, either by the officer or employee
for "Good Reason" or by the Company "Without Cause" (each as defined in the
Change in Control Agreement), such executive or employee will be entitled
to receive (i) accrued salary and other benefits earned or accrued, (ii) an
amount equal to a multiple of such person's Base Salary and Additional
Compensation (each as defined), (iii) cash in lieu of shares receivable
upon the exercise of options awarded under the 1994 Plan, and (iv) cash for
such unvested portion of such person's interest in any of the Company's
pension plans. In addition, if any payment or distribution (including
payments under the Change in Control Agreement, any stock option agreement
or otherwise) to an officer or employee is determined to be an "excess
parachute payment" under the Code, such officer or employee would be
entitled to receive an additional payment (net of taxes, including interest
and penalties) to compensate such officer or employee for any excise tax
imposed by the Code on such payment or distribution. The specified multiple
for a person's Base Salary and Additional Compensation referred to above
are: two, in the case of the named executive officers and one senior
officer; one, in the case of certain other officers; and one-half, in the
case of certain key employees.
In addition to the above-described agreements, the Company indicated
that it has agreed to reimburse each officer and employee party to a Change
in Control Agreement for certain legal, financial and other professional
services.
Certain Provisions of the Declaration of Trust. Article VIII, Section
8.10 of the Company's Declaration of Trust provides that:
any person who owns, directly or indirectly, more than one
percent (1%) of the securities of, or acts as an officer,
trustee, director or employee of or consultant for, or is
otherwise affiliated with or controlled by, any real estate
company (a) that competes with the Trust for investments, (b)
that is a major supplier of services to the Trust, or (c) in
which the Trust has a significant financial interest, or any
person who is an agent of, or is otherwise affiliated with or
controlled by any such person, shall not be qualified to serve
as a Trustee.
Gotham believes that each of the Gotham Nominees is fully qualified under
the Company's Declaration of Trust and By-Laws to serve as a Trustee of the
Company, and that none of the restrictions contained in the foregoing
provision will prevent any Gotham Nominee from serving as a Trustee if
elected. The Company has alleged that the Gotham Nominees are not qualified
to serve as Trustees in filings made in connection with its litigation
against Gotham, but the Company has not provided any specifics relating to
such allegations. Gotham belives that such allegations are without merit
and that Gotham will prevail on this issue in the litigation. See "Certain
Litigation."
In addition, Section 8.1 of the Declaration of Trust provides in
relevant part that "[t]he number of Trustees shall be not less than three
nor more than fifteen, as from time to time determined at annual . . .
meetings of the Beneficiaries by affirmative vote of the holders of a
majority of the shares represented and entitled to vote at such meetings."
In its litigation against Gotham and Gotham II, the Company has presented
its view that seats created by an increase in the size of the Board would
be vacancies, which under Section 8.4 of the Declaration of Trust would be
filled by the incumbent Trustees. Gotham believes that the right to elect
Trustees at an annual meeting is expressly reserved to the Beneficiaries in
Section 8.2 of the Declaration of Trust and that nothing in the Declaration
of Trust derogates that right. The structure and order of Sections 8.1
through 8.4 of the Declaration of Trust indicate that the right of the
Trustees to fill vacancies arises only when a Trustee resigns or is removed
(Section 8.3) or when it is determined subsequent to an election that a
newly-elected Trustee is not qualified to serve as a Trustee under the
Declaration of Trust (Section 8.2), and not in connection with an increase
in the size of the Board of Trustees. Gotham believes that this conclusion
is consistent with well-established law which provides that absent an
explicit provision in the governing documents to the contrary, shareholders
have the right to vote for newly-created seats on a board and these seats
are not deemed to be vacancies.
Gotham believes that the Company's view is without merit and that
Gotham and Gotham II will prevail on this issue in the litigation. However,
if the Company prevails on this issue in the litigation and the Gotham
Proposal is adopted, a majority of the incumbent Trustees would be entitled
to select the individuals to fill the six newly-created positions on the
Board of Trustees. If the Company prevails on this issue in the litigation
and the Current Board's Proposal is adopted, a majority of the incumbent
Trustees would be entitled to select the individuals to fill the three
newly-created positions on the Board of Trustees. See "Certain Litigation."
Pending Litigation. Gotham believes that if the Gotham Proposal is
adopted and each of the Gotham Nominees are elected to the Board of
Trustees, the litigation between the Company and Gotham and Gotham II will
be terminated. See "Certain Litigation."
Cost of Proxy Solicitation. Gotham intends to seek reimbursement from
the Company for its costs incurred in connection with this proxy
solicitation. Such request for reimbursement will not be submitted to a
vote of the Company's Beneficiaries.
Gotham disclaims any responsibility for the accuracy of the
information set forth herein relating to the Mastandrea Employment
Agreement, the Senior Notes, the Impark Put-Call Agreement, the Impark
Credit Agreement, the Impark Ancillary Agreement, the Company Credit
Agreement, the 1994 Plan and the Change in Control Agreements. Such
information has been extracted from the Company's public filings (except
for information regarding the Company Credit Agreement, which has extracted
from the unsigned copy of such agreement provided to Gotham by the
Company).
CERTAIN EFFECTS OF THE CLINTON ADMINISTRATION'S BUDGET PROPOSALS
The Company is one of a small number of REITs with a stapled-stock or
paired share structure, which allows it through its stapled management
company to acquire and hold operating businesses. The Company's structure
(as well as similar structures of certain other REITs) was grandfathered
when similar structures for most other REITs were prohibited under the
Deficit Reduction Act of 1984. The Clinton Administration's current
proposed Budget of the United States Government for the Fiscal Year 1999,
dated February 2, 1998, contains a proposal which would limit the
grandfathered status of existing stapled-stock REITs, including the
Company. According to the proposal, "for purposes of determining whether
any grandfathered entity is a REIT, the stapled entities would be treated
as one entity with respect to properties acquired on or after the date of
the first committee action and with respect to activities or services
relating to such properties (i.e., properties that are acquired after the
[date of such first committee action]) that are undertaken or performed by
one of the stapled entities on or after such date." If this proposal is
passed into law, the Company will not be able to make investments which
take advantage of its stapled-stock structure following the date of the
first committee action relating to the proposal. In addition, the proposal
may make it difficult for the Company to pursue strategic alternatives to
maximize the value inherent in its stapled-stock structure. It is unclear
at the present time whether this proposal or any other proposal which would
serve to limit the advantages to the Company of its stapled-stock structure
will be adopted.
CERTAIN INFORMATION REGARDING THE PARTICIPANTS
The principal business of Gotham and Gotham II is the buying and
selling of securities for investment for its own account. Section H
Partners, L.P. is the general partner of Gotham and Gotham II, and Karenina
Corporation and DPB Corporation are general partners of Section H Partners,
L.P. Gotham Partners Management Co. LLC, a limited liability company
affiliated with Gotham and Gotham II, manages the investments of Gotham and
Gotham II. The principal business address of each of such entities is care
of 110 East 42nd Street, 18th Floor, New York, New York 10017.
Gotham, Gotham II, Gotham Partners Management Co. LLC, Section H
Partners, L.P., Karenina Corporation, DPB Corporation and the Gotham
Nominees are sometimes referred to herein as the "Participants" in this
solicitation. No employees or other representatives of Gotham or Gotham
Partners Management Co. LLC will solicit proxies other than those employees
who are Gotham Nominees. The transactions involving Shares over the past
two years by the Participants and certain other information with respect to
the Participants is set forth on Schedule II of this Proxy Statement.
Except as set forth in this Proxy Statement (including the Schedules
hereto), none of the Participants, or any associate of the foregoing,
directly or indirectly owns any securities of the Company or any subsidiary
of the Company, beneficially or of record, has the right to acquire
beneficial ownership of such securities within 60 days or has purchased or
sold such securities within the past two years.
INFORMATION CONCERNING THE COMPANY
The Company is subject to the informational requirements of the
Exchange Act, and in accordance therewith files reports and other
information with the Commission. Reports, proxy statements and other
information filed by the Company with the Commission in accordance with the
Exchange Act may be inspected and copied at the public reference facilities
of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional offices of the
Commission: 7 World Trade Center, Suite 1300, New York, New York 10048 and
Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material can be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, such material concerning the Company can
be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005. The Commission also maintains a World
Wide Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants,
including the Company, that file electronically with the Commission.
VOTING AND PROXY PROCEDURES
The Company has set February 13, 1998 as the Record Date. Only
Beneficiaries of record on the Record Date will be entitled to notice of
and to vote at the Annual Meeting. Each Share is entitled to one vote.
Beneficiaries who sell Shares before the Record Date (or acquire them
without voting rights after the Record Date) may not vote such Shares.
Beneficiaries of record on the Record Date will retain their voting rights
in connection with the Annual Meeting even if they sell such Shares after
the Record Date. Based on publicly available information, Gotham believes
that the only outstanding class of securities of the Company entitled to
vote at the Annual Meeting is the class constituting the Shares. According
to publicly available information, as of February 13, 1998, there were
31,562,450 Shares issued and outstanding.
Shares represented by properly executed WHITE proxy cards will be
voted at the Annual Meeting as marked and, in the absence of specific
instructions, will be voted FOR the Gotham Proposal, FOR the election of
the Gotham Nominees, AGAINST the Current Board's Proposal and in the
discretion of the persons named as proxies on all other matters as may
properly come before the Annual Meeting.
Abstentions and broker non-votes will be included in determining the
number of Shares present for purposes of determining the presence of a
quorum.
Approval of the Gotham Proposal or the Current Board's Proposal
requires the affirmative vote of a majority of Shares represented by person
or proxy and entitled to vote at the Annual Meeting. Broker non-votes will
not be treated as entitled to vote on the Gotham Proposal or the Current
Board's Proposal and, therefore, will have no effect on whether the Gotham
Proposal or the Current Board's Proposal is adopted. Abstentions from
voting on the Gotham Proposal or the Current Board's Proposal have the same
effect as a vote "against" the Gotham Proposal or the Current Board's
Proposal, respectively.
Election of the Gotham Nominees to the seats on the Board of Trustees
to which they were nominated requires the affirmative vote of a plurality
of the Shares cast for such seats. Abstentions and broker non-votes will
have no effect on the election of the Gotham Nominees to the Board of
Trustees.
Beneficiaries of the Company may revoke their proxies at any time
prior to its exercise by attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of itself
constitute revocation of a proxy) or by delivering a written notice of
revocation. The delivery of a subsequently dated proxy which is properly
completed will constitute a revocation of any earlier proxy. The revocation
may be delivered either to Gotham in care of Beacon Hill Partners, Inc.
("Beacon Hill") at the address set forth on the back cover of this Proxy
Statement or to the Company at 55 Public Square, Suite 1900, Cleveland,
Ohio 44113-1937, or any other address provided by the Company. Although a
revocation is effective if delivered to the Company, Gotham requests that
either the original or photostatic copies of all revocations be mailed to
Gotham in care of Beacon Hill at the address set forth on the back cover of
this Proxy Statement or faxed to Beacon Hill at (212) 843-4384 so that
Gotham will be aware of all revocations and can more accurately determine
if and when proxies have been received from the holders of record on the
Record Date of a majority of the outstanding Shares.
IF YOU WISH TO VOTE FOR THE GOTHAM PROPOSAL, FOR THE ELECTION OF THE
GOTHAM NOMINEES TO THE BOARD AND AGAINST THE CURRENT BOARD'S PROPOSAL,
PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED WHITE PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED. GOTHAM RECOMMENDS THAT YOU VOTE "FOR" THE
GOTHAM PROPOSAL AND GOTHAM NOMINEES AND "AGAINST" THE CURRENT BOARD'S
PROPOSAL.
SOLICITATION OF PROXIES
Solicitation of proxies is being made by and on behalf of Gotham.
Proxies will be solicited by mail, advertisement, telephone or facsimile
and in person. Solicitations may be made by certain directors, officers and
employees of Gotham and its affiliates and associates, none of whom will
receive additional compensation for such solicitation.
Gotham has retained Beacon Hill for solicitation and advisory services
in connection with this solicitation, for which Beacon Hill will receive
compensation not to exceed $50,000 together with reimbursement for its
reasonable out-of-pocket expenses. Gotham has also agreed to indemnify
Beacon Hill against certain liabilities and expenses, including under the
federal securities law.
Gotham and Beacon Hill will solicit proxies from individuals, brokers,
banks, bank nominees and other institutional holders. Gotham has requested
banks, brokerage houses and other custodians, nominees and fiduciaries to
forward all solicitation materials to the beneficial owners of the shares
they hold of record. Gotham will reimburse these record holders for their
reasonable out-of-pocket expenses in so doing. It is anticipated that
Beacon Hill will employ approximately 50 persons to solicit the Company's
Beneficiaries for the Annual Meeting.
The cost of the solicitation of proxies is being borne by Gotham.
Costs related to the solicitation of proxies include or may include
expenditures for attorneys, accountants, financial advisers, proxy
solicitors, public relations advisers, printing, advertising, postage,
litigation and related expenses and filing fees and are expected to be in
the aggregate approximately $2,700,000. Gotham estimates that through the
date hereof, its expenses in connection with this solicitation are
approximately $1,700,000.
Gotham intends to seek reimbursement from the Company for its costs
incurred in connection with this proxy solicitation. Such request for
reimbursement will not be submitted to a vote of the Company's
Beneficiaries.
BENEFICIARY PROPOSALS FOR 1999 ANNUAL MEETING
The Company's Preliminary Proxy Statement indicates that proposals of
the Company's Beneficiaries that are intended to be presented by such
Beneficiaries at the 1999 Annual Meeting of Beneficiaries of the Company
must be received by the Company on or before November 5, 1998 in order to
be considered for inclusion in the proxy statement and form of proxy
relating to that meeting. The inclusion of any proposal will be subject to
applicable rules of the Commission.
OTHER MATTERS AND ADDITIONAL INFORMATION
Gotham is unaware of any other matters to be considered at the Annual
Meeting. Gotham has notified the Company of its intention to bring before
the Annual Meeting the Gotham Proposal and its nomination of the Gotham
Nominees. Should other proposals be brought before the Annual Meeting, the
persons named as proxies on the enclosed WHITE proxy card will vote on such
matters in their discretion. Beneficiaries will have no appraisal or
similar rights of dissenters with respect to the Gotham Proposal.
Schedule II of this Proxy Statement sets forth certain information, as
made available in public documents, regarding Shares held by the Company's
management and Trustees and beneficial owners of more than five percent of
the Company. The information concerning the Company contained in this Proxy
Statement and the Schedules attached hereto has been taken from, or is
based upon, publicly available information. To date, Gotham has not had
access to the books and records of the Company. Although Gotham does not
have any knowledge that would indicate that any statement contained herein
based upon such documents and records is untrue, Gotham does not take any
responsibility for the accuracy or completeness of the information
contained in such documents and records, or for any failure by the Company
to disclose events that may affect the significance or accuracy of any such
information.
GOTHAM PARTNERS, L.P.
March 16, 1998
SCHEDULE I
SHARES HELD BY GOTHAM AND GOTHAM II
Gotham is the beneficial owner of an aggregate of 2,601,951
Shares. Gotham II is the beneficial owner of an aggregate of 30,449
Shares. Within the past two years, Gotham and Gotham II have engaged
in the following transactions in Shares. Except as otherwise indicated
below, the securities acquired or disposed of consisted of Shares and
the transactions were effected on the New York Stock Exchange.
I. Transactions in Shares by Gotham
TRANSACTION NUMBER OF SHARES PRICE PER SHARE
DATE ACQUIRED/(DISPOSED OF) OR OPTION
----------- ---------------------- ---------------
11/13/96 330,240 $10.00360
11/14/96 9,846 10.06000
11/14/96 364,702 10.43300
11/15/96 123,077 10.43300
11/15/96 20,677 10.44500
12/19/96 (553,742) 11.00000
12/19/96 690,000 (1) 3.38000
12/20/96 98,510 11.36000
12/23/96 11,525 11.31000
12/24/96 39,400 11.56000
1/03/97 2,970 11.47670
1/24/97 109,970 13.43330
1/27/97 29,690 13.35110
1/28/97 65,590 13.41280
1/29/97 (360,000) 13.49000
1/29/97 7,300 13.43500
1/29/97 493,150 (2) 4.31635
1/30/97 (190,905) 13.39100
2/03/97 7,595 13.52750
3/20/97 (49,315) 13.19600
3/20/97 (29,655) 13.19000
3/21/97 (37,475) 13.32500
4/11/97 6,410 13.36730
4/14/97 157,810 13.90610
4/25/97 56,500 13.72260
4/29/97 55,000 13.80000
4/30/97 30,930 13.79480
5/01/97 39,700 13.58150
5/06/97 40,000 13.56000
5/29/97 127,680 12.79760
5/30/97 77,585 12.78330
6/02/97 23,740 13.05000
6/10/97 98,800 13.31000
8/01/97 19,300 13.32360
8/04/97 9,895 13.30000
8/05/97 49,480 13.42500
8/06/97 6,430 13.30000
8/12/97 495 13.42500
8/13/97 30,575 13.41310
8/14/97 2,965 13.30000
8/15/97 24,740 13.27500
8/18/97 19,790 13.30000
10/03/97 59,376 13.63330
10/07/97 173,180 13.55000
10/08/97 98,960 13.43500
10/09/97 98,960 13.37250
1/23/98 10,500 14.92500
2/04/98 100,000 11.66800
- --------------------
(1) Cash settled call option on 690,000 Shares at $8.80 per Share pursuant
to a Letter Agreement, dated as of January 24, 1997, by and between
Gotham and J.P. Morgan Securities, Inc. ("J.P. Morgan"), as agent for
Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), as
modified to physical settlement by a Letter Agreement, dated as of
June 10, 1997, by and between Gotham and J.P. Morgan, as agent for
Morgan Guaranty. The option was exercised by Gotham on December 24,
1997 at an aggregate exercise price of $6,072,000.
(2) Cash settled call option on 493,150 Shares at $10.80 per Share
pursuant to an Option Agreement, dated as of January 29, 1997, by and
between Gotham and Bankers Trust Company ("Bankers Trust"), as
modified to physical settlement by the First Transaction Amendment,
dated as of June 4, 1997, by and between Gotham and Bankers Trust. The
option was exercised by Gotham on January 21, 1998 at an aggregate
exercise price of $5,326,020.
II. Transactions in Shares by Gotham II
TRANSACTION NUMBER OF SHARES PRICE PER SHARE
DATE ACQUIRED/(DISPOSED OF) OR OPTION
----------- ---------------------- ---------------
11/13/96 5,160 $10.00360
11/14/96 154 10.06000
11/14/96 5,698 10.43300
11/15/96 1,923 10.43300
11/15/96 323 10.44500
12/19/96 (13,258) 11.00000
12/19/96 10,000 (1) 3.38000
12/20/96 1,490 11.36000
12/23/96 175 11.31000
12/24/96 600 11.56000
1/03/97 4,530 11.47670
1/17/97 (680) 13.06500
1/24/97 1,530 13.43330
1/27/97 410 13.35110
1/28/97 910 13.41280
1/29/97 (5,000) 13.49000
1/29/97 100 13.43500
1/29/97 6,850 (2) 4.31635
1/30/97 (2,650) 13.39100
2/03/97 105 13.52750
3/20/97 (685) 13.19600
3/20/97 (410) 13.19000
3/21/97 (425) 13.32500
4/11/97 90 13.36733
4/14/97 2,190 13.90610
4/30/97 370 13.79481
5/29/97 1,520 12.79760
5/30/97 915 12.78330
6/02/97 1,260 13.05000
6/10/97 1,200 13.31000
8/04/97 105 13.30000
8/05/97 520 13.42500
8/06/97 70 13.30000
8/12/97 5 13.42600
8/13/97 325 13.41310
8/14/97 35 13.30000
8/15/97 260 13.27500
8/18/97 210 13.30000
10/03/97 624 13.63330
10/07/97 1,820 13.55000
10/08/97 1,040 13.43500
10/09/97 1,040 13.37250
- --------------------
(1) Cash settled call option on 10,000 Shares at $8.80 per Share
pursuant to a Letter Agreement, dated as of January 24, 1997, by
and between Gotham II and J.P. Morgan, as agent for Morgan
Guaranty, as modified to physical settlement by a Letter
Agreement dated as of June 10, 1997, by and between Gotham II and
J.P. Morgan, as agent for Morgan Guaranty. The option was
exercised by Gotham II on December 24, 1997 at an aggregate
exercise price of $88,000.
(2) Cash settled call option on 6,850 Shares at $10.80 per Share
pursuant to an Option Agreement, dated as of January 29, 1997, by
and between Gotham II and Bankers Trust, as modified to physical
settlement by the First Transaction Amendment, dated as of June
4, 1997, by and between Gotham II and Bankers Trust. The option
was exercised by Gotham II on January 21, 1998 at an aggregate
exercise price of $73,980.
III. Transactions in Shares by Other Participants
Except as set forth in this Proxy Statement, none of the Participants,
nor any associate of the foregoing, directly or indirectly owns any
securities of the Company or any subsidiary of the Company, beneficially or
of record, has the right to acquire beneficial ownership of such securities
within 60 days or has purchased or sold such securities within the past two
years.
William A. Ackman is the President of Karenina Corporation, a general
partner of Section H Partners, L.P. David P. Berkowitz is the President of
DPB Corporation, a general partner of Section H Partners, L.P., the sole
general partner of Gotham and Gotham II. Mr. Ackman, Mr. Berkowitz,
Karenina Corporation, DPB Corporation and Section H Partners, L.P. may be
deemed the beneficial owners of Shares owned by Gotham and Gotham II. David
S. Klafter and Daniel Shuchman are limited partners of Gotham and Section H
Partners, L.P. Mary Ann Tighe and James A. Williams are limited partners of
Gotham. As limited partners of such entities, Ms. Tighe, Mr. Williams, Mr.
Klafter and Mr. Shuchman have no right to vote or dispose of any Shares
held by Gotham, and therefore do not beneficially own any Shares held by
Gotham.
BENEFICIAL OWNERSHIP OF SHARES BY THE GOTHAM NOMINEES
The following table sets forth the beneficial ownership of Shares as
of March 12, 1998 by each of the Gotham Nominees.
Amount of Approximate
Name Beneficial Ownership Percentage of Class (1)
- ------------------------ -------------------- -----------------------
William A. Ackman(2) 2,632,400 8.34%
Daniel J. Altobello -0- -0-
David P. Berkowitz(2) 2,632,400 8.34
Stephen J. Garchik -0- -0-
David S. Klafter(3), (4) -0- -0-
Richard A. Mandel -0- -0-
Daniel Shuchman(3), (4) -0- -0-
Steven B. Snider -0- -0-
Mary Ann Tighe(4) -0- -0-
James A. Williams(4) -0- -0-
- --------------------
(1) Based on 31,562,450 Shares outstanding as of February 13, 1998, as
listed in the Company's Preliminary Proxy Statement.
(2) Mr. Ackman is the President of Karenina Corporation, a general partner
of Section H Partners, L.P. Mr. Berkowitz is the President of DPB
Corporation, a general partner of Section H Partners, L.P., the sole
general partner of Gotham and Gotham II. Accordingly, Mr. Ackman, Mr.
Berkowitz, Karenina Corporation, DPB Corporation and Section H
Partners, L.P. may be deemed the beneficial owners of Shares owned by
Gotham and Gotham II. For purposes of this table, such ownership is
included.
(3) Mr. Klafter and Mr. Shuchman are limited partners of Section H
Partners, L.P. As limited partners of Section H Partners, L.P., Mr.
Klafter and Mr. Shuchman have no right to vote or dispose of any
Shares held by Gotham, and therefore do not beneficially own any
Shares held by Gotham.
(4) Mr. Klafter, Mr. Shuchman, Ms. Tighe and Mr. Williams are limited
partners of Gotham. As limited partners of Gotham, Ms. Tighe and Mr.
Williams have no right to vote or dispose of any Shares held by
Gotham, and therefore do not beneficially own any Shares held by
Gotham.
ADDITIONAL INFORMATION REGARDING THE PARTICIPANTS
To the knowledge of Gotham, except as set forth in this Proxy
Statement, none of the Participants has any substantial interest, direct or
indirect, by security holdings or otherwise, in any matter to be acted upon
at the Annual Meeting, except for the election of Trustees.
During the past 10 years, none of the Participants has been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
No part of the purchase price of any of the Shares beneficially owned
by any of the Participants is represented by funds borrowed or otherwise
obtained for the purpose of acquiring or holding such securities.
None of the Participants is, or within the past year has been, a party
to any contract, arrangement or understanding with any person with respect
to any securities of the Company, except that (i) Mr. Klafter, Mr.
Shuchman, Mr. Williams and Ms. Tighe are limited partners of Gotham; (ii)
Mr. Ackman is the President of Karenina Corporation, a general partner of
Section H Partners, L.P., the general partner of Gotham and Gotham II;
(iii) Mr. Berkowitz is the President of DPB Corporation, a general partner
of Section H Partners, L.P.; (iv) Mr. Klafter and Mr. Shuchman are limited
partners of Section H Partners, L.P.; (v) Gotham had a cash settled call
option on 493,150 Shares pursuant to an Option Agreement, dated as of
January 29, 1997, by and between Gotham and Bankers Trust, as modified to
physical settlement by the First Transaction Amendment, dated as of June 4,
1997, by and between Gotham and Bankers Trust; (vi) Gotham had a cash
settled call option on 690,000 Shares pursuant to a Letter Agreement, dated
as of January 24, 1997, by and between Gotham and J.P. Morgan, as agent for
Morgan Guaranty, as modified to physical settlement by a Letter Agreement,
dated as of June 10, 1997, by and between Gotham and J.P. Morgan, as agent
for Morgan Guaranty; (vii) Gotham II had a cash settled call option on
6,850 Shares pursuant to an Option Agreement, dated as of January 29, 1997,
by and between Gotham II and Bankers Trust Company, as modified to physical
settlement by the First Transaction Amendment, dated as of June 4, 1997, by
and between Gotham and Bankers Trust; and (viii) Gotham II had a cash
settled call option on 10,000 Shares pursuant to a Letter Agreement, dated
as of January 24, 1997, by and between Gotham II and J.P. Morgan, as agent
for Morgan Guaranty, as modified to physical settlement by a Letter
Agreement, dated as of June 10, 1997, by and between Gotham II and J.P.
Morgan, as agent for Morgan Guaranty. Through their indirect interest in
Section H Partners, L.P., the general partner of Gotham and Gotham II, Mr.
Ackman and Mr. Berkowitz hold a participation interest in the profits
generated by the investment of Gotham and Gotham II in such Shares. Gotham
Partners Management Co. LLC is entitled to an annual fee equal to 1% of the
assets of Gotham and Gotham II as consideration for managing such assets.
Messrs. Ackman, Berkowitz, Klafter and Shuchman are employees of, and
receive compensation from, Gotham Partners Management Co. LLC, and Messrs.
Ackman and Berkowitz each hold 50% of the outstanding equity interests in
the managing member of such entity.
On April 17, 1997, certain entities affiliated with ONEX Corporation
sold a controlling interest in Impark to the Company's affiliated
management company for $75 million, including the assumption of $26 million
of debt. In connection with such sale, certain entities affiliated with
ONEX Corporation and the Company entered into an agreement relating to
certain securities of Impark retained by such entities. Pursuant to such
agreement, such entities have the right to cause the Company to purchase
such securities at a specified price upon certain "trigger events", as
defined in such agreement, which could include the adoption of the Gotham
Proposal and the election of the Gotham Nominees. See "Possible Effects of
the Adoption of the Gotham Proposal and the Election of the Gotham
Nominees" and "Certain Litigation." Mr. Altobello may have an indirect
interest in the outcome of the matters to be acted upon at the Annual
Meeting by virtue of his position as Chairman and CEO of ONEX Food
Services, Inc., a subsidiary of ONEX Corporation.
None of the Participants, or any associate thereof, has any
arrangement or understanding with any person (A) with respect to any future
employment by the Company or its affiliates or (B) with respect to any
future transactions to which the Company or any of its affiliates will or
may be a party.
Except as otherwise disclosed in this Proxy Statement, there are no
pending legal proceedings in which any of the Gotham Nominees or any of
their associates is a party adverse to the Company or any of its affiliates
or in which any of the Gotham Nominees or any of their associates has an
interest adverse to the Company or any of its affiliates.
None of the Gotham Nominees holds any position or office with the
Company or any parent, subsidiary or affiliate of the Company, and none has
ever served as a director of the Company or any parent, subsidiary or
affiliate of the Company.
None of the Gotham Nominees has any family relationship, by blood,
marriage or adoption, to any Trustee, executive officer or person nominated
or chosen by the Company to become a Trustee or executive officer of the
Company. During the last three fiscal years, no compensation was awarded
to, earned by, or paid to any of the Gotham Nominees by any person for any
services rendered in any capacity to the Company or its subsidiaries.
Daniel J. Altobello is the Chairman and CEO of ONEX Food Services, Inc.
which is a subsidiary of ONEX Corporation.
SCHEDULE II
SHARE OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF THE COMPANY
Set forth below is information regarding the Shares owned by certain
beneficial owners, Trustees and executive officers of the Company.
The following table sets forth, according to publicly available
information on file with the Commission as of the dates indicated (except
information with respect to Gotham and Gotham II), the name and address of
each person who is the beneficial owner of more than five percent of the
outstanding Shares at such date, the number of Shares owned by each such
person, the percentage of the outstanding Shares represented thereby and
certain information with respect to such person. Gotham disclaims any
responsibility for the following information (except information with
respect to Gotham and Gotham II), which has been extracted from public
filings.
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENTAGE OF
OF BENEFICIAL OWNER OWNERSHIP CLASS (1)
- --------------------------------------- -------------------- -------------
Apollo Real Estate Investment 2,135,987 Shares (2) 6.8%
Fund II, L.P.
Apollo Real Estate Advisors II, L.P.
1301 Avenue of the Americas
New York, New York 10019
Gotham Partners, L.P. 2,632,400 Shares (3) 8.34
Gotham Partners II, L.P.
110 East 42nd Street, 18th Floor
New York, New York 10017
Franklin Resources, Inc. 2,900,418 Shares (4) 9.2
777 Mariners Island Blvd.
San Mateo, CA 94404
Charles B. Johnson
777 Mariners Island Blvd.
San Mateo, CA 94404
Rupert H. Johnson
777 Mariners Island Blvd.
San Mateo, CA 94404
Franklin Mutual Advisors, Inc.
51 John F. Kennedy Parkway
Short Hills, NJ 07078
Franklin Mutual Series Fund, Inc.
51 John F. Kennedy Parkway
Short Hills, NJ 07078
Stephen Feinberg 1,602,327 Shares(5) 5.1
450 Park Avenue, 28th Floor
New York, New York 10022
- ----------------------------
(1) Based upon 31,562,450 Shares outstanding as of February 13, 1998, as
listed in the Company's Preliminary Proxy Statement.
(2) An Amendment No. 4 to Schedule 13D filed with the Commission on
February 18, 1998 with respect to Shares reflects that Apollo Real
Estate Investment Fund II, L.P. and Apollo Real Estate Advisors II,
L.P. beneficially own an aggregate of 2,135,987 Shares. Apollo Real
Estate Investment Fund II, L.P. and Apollo Real Estate Advisors II,
L.P. are deemed to have shared voting and dispositive power with
respect to such Shares.
(3) As of March 12, 1998, Gotham beneficially owned 2,601,951 Shares. As
of March 12, 1998, Gotham II beneficially owned 30,449 Shares. Each of
Gotham and Gotham II has sole voting and dispositive power with
respect to the Shares beneficially owned by it.
(4) A Schedule 13D filed with the Commission on February 23, 1998 reflects
that Franklin Resources, Inc., Franklin Mutual Advisors, Inc.
("FMAI"), Franklin Mutual Series Fund, Inc., Charles B. Johnson and
Rupert H. Johnson may be deemed to beneficially own an aggregate of
2,900,418 Shares. FMAI has the sole voting and dispositive power with
respect to such Shares.
(5) A Schedule 13D filed with the Commission on February 17, 1998 reflects
that Mr. Feinberg has sole voting and dispositive power with respect
to 348,000 Shares owned by Cerberus Partners, L.P., 869,931 Shares,
consisting of 769,000 Shares and 30,500 Shares of First Union Series A
Cumulative Convertible Redeemable Preferred Shares of Beneficial
Interest, each of which is immediately convertible into 3.3058 Shares
(the "Preferred Shares"), owned by Cerberus International Ltd., and
70,300 Shares owned by Ultra Cerberus Funds, Ltd., and dispositive
power with respect to 314,096 Shares owned in the aggregate by certain
other private investment funds.
The table below sets forth, as of February 13, 1998, with respect to
Trustees and nominees, certain named executive officers, and as to all
Trustees and executive officers as a group, information relating to their
beneficial ownership of Shares of the Company, according to the Company's
Preliminary Proxy Statement:
AMOUNT AND NATURE
NAME OF OF BENEFICIAL PERCENTAGE OF
BENEFICIAL OWNER OWNERSHIP (1) CLASS
---------------- ----------------- -------------
TRUSTEES AND NOMINEES
Kenneth K. Chalmers 8,768 .028%
William E. Conway 19,511 .062
James M. Delaney 2,198 .007
Daniel G. DeVos 15,745 .050
Allen H. Ford 25,000 .079
Russell R. Gifford 16,240 .051
Spencer H. Heine 5,000 .016
Herman J. Russell 8,733 .028
James C. Mastandrea 915,559(2) 2.874
(also an Executive Officer)
EXECUTIVE OFFICERS
Steven M. Edelman 117,670(3) .331
Paul F. Levin 104,728(4) .372
John J. Dee 108,022(5) .342
Thomas T. Kmiecik 76,304(6) .241
All Trustees and executive officers 1,423,478(7) 4.400
as a group (13 persons)
- --------------------
(1) Pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, a
person is deemed to be a beneficial owner if he has or shares
voting power or investment authority in respect of such security
or has the right to acquire beneficial ownership within 60 days.
The amounts shown in the above table do not purport to represent
beneficial ownership except as determined in accordance with this
Rule. Each Trustee and executive officer has sole voting and
investment power with respect to the amounts shown or shared
voting and investment powers with his spouse, except for
restricted shares which have only voting power and no investment
power.
(2) Includes 565,890 Shares in the form of restricted stock over
which Mr. Mastandrea has sole voting power but no investment
power, 286,441 Shares that Mr. Mastandrea has the vested right to
acquire through the exercise of options, and 3,000 Preferred
Shares.
(3) Includes 55,000 Shares in the form of restricted stock over which
Mr. Edelman has sole voting power but no investment power and
55,307 Shares that Mr. Edelman has the vested right to acquire
through the exercise of options.
(4) Includes 50,000 Shares in the form of restricted stock over which
Mr. Levin has sole voting power but no investment power and
51,617 Shares that Mr. Levin has the vested right to acquire
through the exercise of options.
(5) Includes 50,500 Shares in the form of restricted stock over which
Mr. Dee has sole voting power but no investment power and 52,307
Shares that Mr. Dee has the vested right to acquire through the
exercise of options.
(6) Includes 30,000 Shares in the form of restricted stock over which
Mr. Kmiecik has sole voting power but no investment power and
44,647 Shares that Mr. Kmiecik has the vested right to acquire
through the exercise of options.
(7) Includes 490,319 Shares which executive officers have the vested
right to acquire through the exercise of options and 751,390
Shares in the form of restricted stock.
IMPORTANT
Tell your Board what you think! Your vote is important. No matter how
many Shares you own, please give Gotham your proxy FOR approving the Gotham
Proposal, FOR the election of the Gotham Nominees and AGAINST the Current
Board's Proposal by taking three steps:
1. SIGNING the enclosed WHITE proxy card,
2. DATING the enclosed WHITE proxy card, and
3. MAILING the enclosed WHITE proxy card TODAY in the envelope provided
(no postage is required if mailed in the United States).
If any of your Shares are held in the name of a brokerage firm, bank,
bank nominee or other institution, only it can vote such Shares and only
upon receipt of your specific instructions. Accordingly, please contact the
person responsible for your account and instruct that person to execute the
WHITE proxy card representing your Shares.
If you have any questions or require any additional information
concerning this Proxy Statement, please contact Beacon Hill Partners,
Inc. at the address set forth below.
BEACON HILL PARTNERS, INC.
90 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 843-8500 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 253-3814
WHITE PROXY CARD
ANNUAL MEETING OF BENEFICIARIES OF FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS
THIS PROXY IS SOLICITED ON BEHALF OF GOTHAM PARTNERS, L.P.
The undersigned appoints William A. Ackman and David P. Berkowitz, and
each of them acting alone, attorneys and agents with full power of
substitution, as proxy of the undersigned (the "Proxy Agents"), to attend
the Annual Meeting of the Beneficiaries of First Union Real Estate Equity
and Mortgage Investments (the "Company") to be held in the Forum Conference
Center, One Cleveland Center, Cleveland, Ohio, on April 14, 1998,
commencing at 10:00 A.M. local time, and at any and all adjournments or
postponements thereof and any special meeting called in lieu thereof (the
"Annual Meeting"), and to vote all shares of Beneficial Interest of the
Company ("Shares"), as designated on the reverse side of this proxy, with
all powers the undersigned would possess if personally present at the
meeting, as follows: (Please mark an "X" in the appropriate box)
GOTHAM PARTNERS, L.P. RECOMMENDS A VOTE FOR ITEMS 1, 2 and 3
1. ELECTION OF TRUSTEES: To elect William A. Ackman, David P. Berkowitz and
James A. Williams as Class II Trustees.
[ ] FOR all nominees except [ ] WITHHOLD AUTHORITY
as marked below for all nominees
Instruction: To withhold authority to vote for the election of any
nominee(s), write the name(s) of such nominee(s) in the following space:
2. PROPOSAL OF GOTHAM PARTNERS, L.P.: To fix the number of Trustees at
fifteen and to assign two of the six newly-created seats to each of
the three existing classes of Trustees.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. ELECTION OF TRUSTEES: To elect Daniel Shuchman and Steven S. Snider as
Class I Trustees, Mary Ann Tighe and Stephen J. Garchik as Class II
Trustees, and David S. Klafter and Daniel J. Altobello as Class III
Trustees.
[ ] FOR all nominees except [ ] WITHHOLD AUTHORITY
as marked below for all nominees
Instruction: To withhold authority to vote for the election of
any nominee(s), write the name(s) of such nominee(s) in the following
space:
GOTHAM PARTNERS, L.P. RECOMMENDS A VOTE AGAINST THE FOLLOWING PROPOSAL
4. PROPOSAL OF THE COMPANY: To fix the number of Trustees at twelve
with one vacancy to be added to each existing class of Trustees.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(This proxy is continued and is to be signed and dated on the reverse side)
(continued from reverse side)
5. In their discretion, each of the Proxy Agents is authorized to vote upon
any other matters as may properly come before the Annual Meeting.
The undersigned hereby revokes any other proxy or proxies heretofore
given to vote or act with respect to the Shares held by the undersigned,
and hereby ratifies and confirms all actions the herein named Proxy Agents,
their substitutes, or any of them may lawfully take by virtue hereof. If
properly executed, this proxy will be voted as directed above. If no
direction is indicated with respect to the above proposals, this proxy will
be voted FOR the election of the nominees set forth in Items 1 and 3, FOR
the proposal set forth in Item 2, AGAINST the proposal set forth in Item 4
and in the manner set forth in Item 5.
This proxy will be valid until the sooner of one year from
the date indicated below and the completion of the Annual Meeting.
DATED: ________________________, 1998
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(Signature)
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(Signature, if held jointly)
-------------------------------------
(Title)
Please sign exactly as your shares are
registered. When shares are held
jointly, joint owners should each sign.
Executors, administrators, trustees,
etc., should indicate the capacity in
which signing. If a corporation, sign in
full corporate name by authorized
officer. If a partnership, sign in
partnership name by authorized person.
IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
